The Pyschology of Price

I am continually fascinated by how the mind works, especially when it comes to price. Bundles are often a great way to get people to buy more (up-sell or cross-sell). Making it easy to order often times gets people to buy more. Consider combo meals at fast food restaurants as a simple example.

Of course, we also see the converse where unbundling is used to extract higher prices and/or more money, though this often occurs due to much of the bundle being perceived as “free.” Airline services unbundling is an example here.

I had the good fortune of attending the 6th game of the World Series this year at Dodger Stadium. I am pretty sure I have not been there in a few decades. When I went to order my Dodger Dog (Nathan’s my be the official hot dog of Major League Baseball but it is not even for sale at Dodger Stadium), I noticed the sign in the picture above. Not being much of a beer drinker, I didn’t order the bundle, but my brother-in-law did (though he insists that was his order despite the sign).

I suspect that sign gets a lot of bundle orders given its prominence. I also assume most people believe they are saving money, as my brother-in-law did. They aren’t. Turns out the bundle price is exactly the same as the price if you bought each item individually. The psychology of the sign causes most people to believe they will save on the bundle. They don’t, but sales increase.

As I said in an earlier post, if people were rational, prices would be too.

Mitch

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