Do you know why we still have a headache after taking a one-cent
aspirin, but why that same headache vanishes when the aspirin costs 50 cents?
This is a
very interesting book
Ariely_Predictably_Irrational_The_Hidden_Forces_That_Shape_Our_Decisions
"Anchoring
influences all kinds of purchases. Uri Simonsohn (a professor at the University
of Pennsylvania) and George Loewenstein, for example, found that people who
move to a new city generally remain anchored to the prices they paid for
housing in their former city. In their study they found that people who move
from inexpensive markets (say, Lubbock, 30 the fallacy of supply and demand The
result was not due to wealth, taxes, or other financial reasons. 31 Texas) to
moderately priced cities (say, Pittsburgh) don't increase their spending to fit
the new market. Rather, these people spend an amount similar to what they were
used to in the previous market, even if this means having to squeeze themselves
and their families into smaller or less comfortable homes. Likewise,
transplants from more expensive cities sink the same dollars into their new
housing situation as they did in the past. People who move from Los Angeles to
Pittsburgh, in other words, don't generally downsize their spending much once
they hit Pennsylvania: they spend an amount similar to what they used to spend
in Los Angeles. It seems that we get used to the particularities of our housing
markets and don't readily change. The only way out of this box, in fact, is to
rent a home in the new location for a year or so. That way, we adjust to the
new environment— and, after a while, we are able to make a purchase that aligns
with the local market."
We were
Paying 1200 $ per month in Del Rio for a 3 bedroom independent house and had a contract which was renewable month to month.
when we had
to move to Big spring which was actually a smaller place we expected prices to be cheaper
but in fact thing wee more costly very few houses were for rent and we
had to settle for a smaller house for 1500$ Per month and a 12 month contract.
"I suspect that the
price changes would make a huge impact on demand if people remembered the
previous prices and noticed the price increases; but I also suspect that
without a memory for past prices, these price changes would have a trivial
effect, if any, on demand. If people had no memory of past prices, the
consumption of milk and wine would remain essentially the same, as if the
prices had not changed. In other words, the sensitivity we show to price
changes might in fact be largely a result of our memory for the prices we have
paid in the past and our desire for coherence with our past decisions—not at
all a reflection of our true preferences or our level of demand."
This is true for every new immigrant who lands
in USA from India and probably other lower and Middle income countries.
We automatically
convert the US $ prices in to Indian rupees and will be quite stingy with our spending for a number of years,which
makes it very frustrating for our kids who were born and bought up here and who are used to spending much more than we did .
"So, WHERE DOES this leave us? If we can't rely on the market forces of supply and demand to set optimal market prices, and we can't count on free-market mechanisms to help us maximize our utility, then we may need to look elsewhere. This is especially the case with society's essentials, such as health care, medicine, water, electricity, education, and other critical resources. If you accept the premise that market forces and free markets will not always regulate the market for the best, then you may find yourself among those who believe that the government (we hope a reasonable and thoughtful government) must play a larger role in regulating some market activities, even if this limits free enterprise. Yes, a free market based on supply, demand, and no friction would be the ideal if we were truly rational. Yet when we are not rational but irrational, policies should take this important factor into account"
I think this is something Arun Jaitely the finance minister of India needs to take in to consideration. Indian Government needs to look closely at the exorbitant prices demanded by the various Arms suppliers and even the commodities and energy suppliers and their demanded prices
"So, WHERE DOES this leave us? If we can't rely on the market forces of supply and demand to set optimal market prices, and we can't count on free-market mechanisms to help us maximize our utility, then we may need to look elsewhere. This is especially the case with society's essentials, such as health care, medicine, water, electricity, education, and other critical resources. If you accept the premise that market forces and free markets will not always regulate the market for the best, then you may find yourself among those who believe that the government (we hope a reasonable and thoughtful government) must play a larger role in regulating some market activities, even if this limits free enterprise. Yes, a free market based on supply, demand, and no friction would be the ideal if we were truly rational. Yet when we are not rational but irrational, policies should take this important factor into account"
I think this is something Arun Jaitely the finance minister of India needs to take in to consideration. Indian Government needs to look closely at the exorbitant prices demanded by the various Arms suppliers and even the commodities and energy suppliers and their demanded prices
