The price is right, regardless of the postage
May 12, 2009 – 11:04 amTest auctions on eBay showed that most people prefer to pay a low price for an item and also pay postage than pay a higher price and get free postage, even when the former added up to more than the latter.
A CD for $5+$6 postage is preferred to a CD for $10+freepost. It wasn’t presented as that stark a choice: multiple auctions with different price-postage ratios revealed a net preference for low item price and a poor correlation between auction success and stated postage costs.
Interesting but hardly surprising: the salience of the price is greater than the cost of shipping (the anchoring cognitive fallacy), and people in general are not as rational or systematic as they/we believe. Or, as the authors put it:
We show that these results can be accounted for by boundedly rational bidding behavior such as loss-aversion with separate mental accounts for different attributes of the price or disregard for shipping costs.
This is science with real-world application: if you’re selling something in online auctions in competition with similar/same products you’ll do better, all else being equal, to price it low and impose a large-but-ignored shipping cost.
Source: http://www.marginalrevolution.com/marginalrevolution/2006/02/make_money_on_e.html
One Response to “The price is right, regardless of the postage”
Just wanted to say that I read your blog quite frequently and I’m always amazed at some of the stuff people post here. But keep up the good work, it’s always interesting.
See ya,
By Robert Shumake on Jan 19, 2010