Tuesday, June 29, 2010

Pricing Riddle Solved?

Loyal Reader Evren wrote the following as a comment to my latest weird pricing find:
I see this as a schema to increase consumption, the same as buy three get one free deal while you need only one dish washing liquid that lasts you a month. In this case: you see the odd pricing and quickly realize that ordering three 6-wing packages is more economical. Where does game theory come into play? You think you are outsmarting the retailer while the retailer knows that you think you are outsmarting him by devising this clever schema of odd pricing to confuse you.
That might be right, but then there is always the question: What if I know their strategy? But then what if they know that I know their strategy? And if I know that they know that I know their strategy? And so on and so forth... In fact, you can read about one of the most famous examples of this strategy, or even see it visually in an all-time classic of the seventh art.

By the way, that movie has other great quotes such as inconceivable (and the follow-up, you keep using that word. I do not think it means what you think it means), which has featured in my blog, or my favorite: Hello. My name is Inigo Montoya. You killed my father. Prepare to die... Ahhh, the good old days...

As a small aside, The Princess Bride was sort of Yale tradition in the sense that it was the first movie incoming freshmen (or fresh people to be PC) were shown. I wonder if that tradition is alive and kicking...

Coming back to more serious matters, Evren's point does make sense, but I think I am leaning towards the plain stupidity argument...

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