Peregrine wrote:There's actually a very simple reason: I bet you wanted to buy the larger one when you saw that price, didn't you? Now consider the situation if they'd offered the smaller one at the same per-volume price. Would you feel so strongly that you should buy the biggest product anymore? Probably not. So, to get you to buy the larger one they increase the price on the smaller one so it looks like the big one is saving you money.
The other part of the reason is that you want to set prices to get as much as you can from every different type of customer. So for the customer who actually spends the time comparing different bottles at their per oz price you might only get them buying at 5 c/oz, but that's still more than it cost to make it and put it in a store. But there's also the guy who doesn't think that much about purchases at less than $2, he just grabs what he wants in the most convenient size for him - that guy you can make more profit on. The trick is in setting up a variety of ways of selling your product so you make as much money as possible on each customer.
The classic example is airline tickets. Even notice that airplane tickets start out reasonable, then increase steadily in price, before dropping right down when there's a few days before the flight takes off? It's because decades ago airlines were among the first industries to do really meaningful customer analysis, and start to use that information in a powerful way. The first discovery was that vacationers were the most price sensitive, and booked their flights months in advance - so the airlines started competing primarily on price for flights booked months in advance.
In contrast, businessmen didn't much care about the price of the flight, the company was paying and the meeting had to happen so pay whatever, and so airlines price gouged. Competition then started between airlines on stuff these businessmen actually cared about - airport lounges, free flights and other bonus stuff through loyalty programs (which the businessmen liked because they got them, not their companies), but all the while they were paying a lot more per ticket than people who shopped around three months before they flew.
And now, with the advent of the internet, on-line booking and casual flights, airlines have adjusted their model once more, to offer cheap flights for whatever price they can get, just to fill up empty seats. They know this doesn't hurt the vacationer, who isn't going to risk their booked annual leave on not getting a flight, and they know the businessmen isn't going to wait until two days before his flight so he can save a few hundred dollars.
The whole art of pricing is basically to figure out all the different customer groups you've got, and figure out how to charge each group as much as they're willing to pay, and then hiding that your doing it.
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Grey Templar wrote:Well a rational customer will have different reasons for wanting the different sizes.
Someone may not want to waste anything, so they purchase the smaller size. Another will purchase the larger when it makes more sense(such as for drinking at home)
The Rational Customer exists. Whats rational for one is not rational for the other of course, thats why we have target customers.
Well, the customer isn't rational. That's why stuff costs $1.99 instead of $2 - because people over inflate that last cent, so that $1.99 feels significantly less than $2.
The answer is more that the customer is rational enough.
Automatically Appended Next Post: Peregrine wrote:Except you only have to drink a very small amount extra to make it the better deal. After that you can do whatever you want, throw it away, drink it, save it for later, whatever. Even if you're only ahead by a small amount you're still ahead. Therefore the rational choice is to always buy the larger one.
If rationality was a functional of determining how to consume the most soda for the least amount spent, then sure, that'd be rational.
But life isn't really about that kind of price efficiency. In fact, when a person earns, lets say $40,000, and they're buying an item that costs less than $2, the most rational thing is to dedicate as little time to thinking about it as possible.
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Frazzled wrote:Inflation. We are in a Carter style "Malaise" of stagnant growth and inflation.
Note the CPI doesn't include fuel costs or food, the big items on a lot of people's monthly bills.
Oh for feth's sake, buddy. I mean, how many times do I have to tell you that's just wrong. False. Incorrect. A thing that isn't true.
All of the indices used to measure household consumption include fuel, food and utilities. So stop saying otherwise.
And no, the US doesn't have stagflation. This is because stagflation was the product of specific industry effects (massive oil price mostly) and a particular economic approach that felt unemployment could be kept permanently low through high inflation. The first isn't happening (there was a general trend of upwards commodity prices which is now in decline) and the second is now literally the exact opposite approach undertaken by the fed (who's monetary policy could basically be summed up as acting to ensure inflation sits within a narrow band, with complete indifference to unemployment).
Automatically Appended Next Post: Grey Templar wrote:Corn itself is inefficient as a food source compared to things like Rice and Wheat, making it even more inefficient is insane.
Rice is only efficient when you have heaps of water relative to farming land.
It absolutely blows my mind that Australia exports rice, it's basically exporting water - the one natural resource we really, truly don't have.
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KalashnikovMarine wrote:My buddy and I talk about it, even once you factor in the difference between Aussie and US money and account for the differences in minimum wage down below... yeah it's brutal.
It's basically the product of the exchange rate not actually being indicative of the cost of goods, at least not in the short term. So our interest rates change relative to yours, money floods out of the USD and into the AUD, and so our dollar adjusts to go up. But we still pay $5 for a Big Mac, and you're still paying $3.
Long term the aussie dollar should drift back to somewhere around buying 70c US, and there'll be something closer to parity.
