In our locality, Pakistan, price of IPHONE is still above US $ 500. Thanks God it still available here even at high price. We are hoping for best that prices will come down soon.
Posted by Armughan on 07/01 at 08:45 AM
Price anchoring
Sunday, June 22, 2008
Print
Email
RSS
Tweet This! Save this entry to my Favorites
There is a really good article on price anchoring and the iPhone in the Washington Post today.
When the new iPhone was launched the retail price was around $599 - pretty stiff for a new mobile phone - but a deliberate tactic not just to skim revenues from early adopters (who tend to be insensitive anyway to the price) but also to anchor in the minds of consumers that this is a premium product at the cutting edge of design that you will have to pay a high price pay. Then the discounting starts, and because the initial price was high and was anchored in people’s minds, a discount looks really attractive perhaps blinding people to the higher costs linked to entering a 12 month or an 18 month contract with the mobile service provider selling the iPhones.
Dan Ariely is quoted as saying
“It establishes a reference price of $600, and now when it comes down, we compare it to the higher price. I don’t know if Steve Jobs planned this or not, but if he manipulated based on anchoring, he did a very nice trick.”
“You get the iPhone, and you get the deal,” said Richard Thaler, a University of Chicago economist who came up with the notion of transaction utility, which he has described as “the difference between the amount paid and the ‘reference price’ for the good, that is, the regular price that the consumer expects to pay for this product.”
The rest of the article is here
Note: Dan’s new book ”Predictably Irrational” has been flying off the shelves of my local bookstore ... it seems to be one of the books of choice among my students this summer.
Print Email RSS Tweet This!
ECONOMICS TEACHER RESOURCE NEWSLETTER
Join over 4,000 other Economics Teachers in the UK and around the world who receive the tutor2u Economics Resource Email newsletter. Get special offers, first news of latest resources, teaching ideas, conferences and workshops.
Recent Threads on the Economics Teacher Discussion Forums:
Posts in: General Economics Teaching
Video Case-study - lunchtime prices slashed
Long Exam Example to Use for Revision Please?
Good hotel in London for school trip
Competitive Markets
Diminishing Returns
Complementary goods - HELP Please!
URgent Help Needed
Equilibrium concept
The price of life
Extended Project Qualification
Comments
Most Popular Topic Tags on the Economics Blog
recession, demand, economics, price, unemployment, prices, inflation, investment, costs, profit, downturn, supply, trade, debt, employment, confidence, euro, gdp, competition, capacity, risk, production, china, oil, incentives, exports, expectations, housing, pay, manufacturing, sterling, food, profits, property, mortgage, tutor2u, globalisation, banks, revision, slowdown, borrowing, usa, retailers, emissions, deflation, airlines, innovation, dollar, supermarkets, entrepreneur, efficiency, monopsony, elasticity, aqa, welfare, consumption, economist, productivity, saving, google, keynes, opec, wealth, depression, moodle, depreciation, jobs, credit crunch, competitiveness, economic cycle, cars, externalities, stocks, infrastructure, environmental, strategy, tim harford, carbon, vle, monopoly, subsidy, evaluation, management, eu, losses, protectionism, spare capacity, inequality, environment, poverty, bank of england, budget deficit, construction, behavioural, wages, macroeconomics, carbon trading, steel, commodities, output gap, skills, japan, oligopoly, currencies, imports, bbc, stagflation, contestable, cpi, agflation, farming, newsnight, choices, regulation, survey, taxes, government failure, itunes, minimum wage, lse, climate change, paul mason, population, intervention, keynes society, aviation, amazon, fiscal stimulus, single market, pricing, dan ariely, nationalisation, cartel, pollution, eton college, interest rates, shareholder, london, rationality, redundancies, market failure, rpi, mpc, shipping, behavioural economics, germany, robert peston, india, rsa, reputation, currency, quantitative easing, facebook, income elasticity, stakeholders, current account, brazil, coffee, savings, microsoft, monetary policy, crowding out, collapse, barriers to entry, multiplier effect, economies of scale, suppliers, price discrimination, uk economy, development, quiz, apple, surplus, taxation, tesco, free, scrappage, labour market, behaviour, tragedy of the commons, opportunity cost, open source, vat, smoking, cost of living, poverty trap, merger, growth, speculation, edinburgh, ownership, discrimination, northern rock, global, cost benefit analysis, ireland, oecd, supply chain, shareholders, scarcity, balance of payments, petrol, liquidity, duopoly, etonomics, iphone, starbucks, trade deficit, happiness, budget, human capital, capital, subsidies, immigration, eurozone, takeover, exploitation, ecb, paradox of thrift, wiki, advertising, public sector, labour force survey, peter day, utility, wants, brand, tax, poland, iceland, blog, recovery, foreign exchange, european union, indirect tax, robert frank, roger bootle, ocr economics, heathrow, hbos, hotels, freight, creative destruction, federal reserve, kaletsky, price war, information failure, crude oil, spain,All tags
