Dan Ariely: Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers
Abstract (Via Carmon & Ariely)
We propose that buying- and selling-price estimates reflect a focus on what the consumer forgoes in the potential exchange and that this notion offers insight into the well-known difference between those two types of value assessment. Buyers and sellers differ not simply in their valuation of the same item but also in how they assess the value. Buyers tend to focus on their sentiment toward what they forgo (typically, the expenditure), and buying prices are thus heavily influenced byvariables such as salient reference prices. By the same token, sellers tend to focus on their sentiment toward surrendering the item, and selling prices are hence more heavily influenced by variables such as benefits of possessing the item. Fourstudies examining buying- and selling-price estimates of tickets for National Collegiate Athletic Association basketball games offer consistent support for these ideas. The studies show that naturally occurring differences among respondents in attitudes relating to the tickets that sellers forgo (e.g., significance of the game) corresponded more closely to variation in selling prices than in buying prices. Conversely, measures relating to the expenditure (e.g., respondents’ concern with money) corresponded more closely to buying prices than to selling prices. Using controlled manipulations we then showed that changes in aspects relating to the game (e.g., expected climate in the stadium) affected selling prices more than buying prices, but changes relating to the expenditure (e.g., list price of the ticket) influenced buying prices more than selling prices. We also showed that drawing attention to the benefits of possessing a ticket before asking for the price estimates influenced buying prices more than selling prices, supporting our claim that otherwise these benefits are naturally more salient to sellers than buyers. Similarly, drawing attention to alternative uses of money before asking for price estimates influenced selling prices more than buying prices.