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Priceless: The Myth of Fair Value (and How to Take Advantage of It)

William Poundstone

3.84 · Rating details · 1,672 ratings · 171 reviews

Prada stores carry a few obscenely expensive items in order to boost sales for everything else (which look like bargains in comparison). People used to download music for free, then Steve Jobs convinced them to pay. How? By charging 99 cents. That price has a hypnotic effect: the profit margin of the 99 Cents Only store is twice that of Wal-Mart. Why do text messages cost ...more

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Paperback, 352 pages

Published January 4th 2011 by Hill and Wang (first published 2010)

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Feb 24, 2010 David rated it really liked it · review of another edition

Shelves: read-econbiz

This book's big idea: Normal people under average contemporary circumstances can consistently be hoodwinked into making decisions against their own economic interest.

Define “normal people” as anyone with an average attention span and average load of worries, cares, responsibilities, and distractions.

Define “average contemporary circumstances” as the usual places and times when people are compelled to spend money, e.g., in crowded and noisy stores or markets, under the influence of salespeople on This book's big idea: Normal people under average contemporary circumstances can consistently be hoodwinked into making decisions against their own economic interest.

Define “normal people” as anyone with an average attention span and average load of worries, cares, responsibilities, and distractions.

Define “average contemporary circumstances” as the usual places and times when people are compelled to spend money, e.g., in crowded and noisy stores or markets, under the influence of salespeople on commission, or through websites designed in a deliberately manipulative manner.

Given the above, few people can do calculations in their heads with, at most, three or four variables. Most will struggle with two variables. A consulting industry, presumably populated by grown-ups with the same moral character as single-cell organisms, has grown up around exploiting this weakness in the human character. The result is the proliferation of unnecessarily complicated pricing systems and commercial gimmicks, including but not limited to customer loyalty programs, rebates, and cell phone contracts of Byzantine complexity. Faced with this, customers (also occasionally called in the book, I am not making this up, “suckers”) can then be distracted by a single high or low number, which the confused brain will seize on as the basis for a (bad) decision.

When younger, I was considered something of an extremist because I voiced the opinion that, if people who knowingly aided in the economic exploitation of other members of their society were publicly garrotted at half-time during the Super Bowl, and their corpses hung from the goalposts while birds pecked out their eyes, it might cut down on the number of people who participated in such exploitation, thus benefitting society. However, I have mellowed and become more conservative, a result of old age (certainly) and wisdom (perhaps). I now believe that people deserve an opportunity to reconsider the error of their ways. So perhaps all that needs to be done is to put exploiters in the stocks and pelt them with old fruits and vegetables, to let them know that their activities are not universally approved-of. Strangely, this comparatively-reasonable opinion, when voiced, still makes people move away from me at social gatherings.

But I digress.

In summary, this book is a readable popular summary of the disciplined and painstaking research which shows that, while crowds might have some wisdom, the individuals and small groups that make most economic decisions have very little.

Interviews with the author about this book on National Public Radio's "The Splendid Table" here and on "Marketplace" here. ...more

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May 28, 2010 Jamie rated it liked it · review of another edition

I've always been interested in the psychology of consumerism, along with related topics like marketing and purchasing behaviors. Both for how shameless it is and how readily we (myself included) seem to fall for what really amount to simple psychological slight of hand. Priceless: The Myth of Fair Value (And How to Take Advantage of It) by William Poundstone looked like it was going to scratch that itch, and while it does to some extent I'm left a little off balance by the book.

If you look at Pr I've always been interested in the psychology of consumerism, along with related topics like marketing and purchasing behaviors. Both for how shameless it is and how readily we (myself included) seem to fall for what really amount to simple psychological slight of hand. Priceless: The Myth of Fair Value (And How to Take Advantage of It) by William Poundstone looked like it was going to scratch that itch, and while it does to some extent I'm left a little off balance by the book.

If you look at Priceless as a whole, it seems to hit a lot of the right notes for me. It takes practical questions like why we buy what we do and why marketers do what they do, and it answers them by turning to theories and well established phenomenon from psychology --most notably Amos Tversky and Daniel Kahneman's prospect theory. There's chapters on how menu consultants use psychological anchoring and the contrast effect to get you to order what they want, an examination of the effectiveness of prices ending in ".99" and other such "charm" numbers, the allure of all-you-can-eat buffets, the power of breaking out many small benefits in a sales pitch (i.e., the "But wait! There's more!" trope), and other such fascinating topics. And overall I'd say it's a good read for all that.

The main thing that keeps me from whole heartedly recommending Priceless to any reader, though, is that none of that good stuff really starts until page 143 out of about 290. The entire front HALF of the book focuses less on the specifics I listed above and more on the general case of prospect theory and its history. In places it reads more like a mini-biography of Kahneman and Tversky as well as some of their predecessors. And when he's not doing this "history of science" thing, Poundstone is going into some pretty gnarly specifics on the science (both from psychology and economics) of all this. Now personally, I loved all this and ate it up because while I knew most of it I was interested to get some biographical information and see it all in a different context. It's just kind of hard to recommend to someone who's walking into the topic without any other education.

And while the book does turn the corner halfway through when it starts getting into some practical and fascinating specifics, those chapters do assume that you've read and understood most of the stuff in the earlier, technical parts. The discussion of our preference for all-expenses-included vacation resorts, for example, assumes that you grokked an earlier discussion about the convex nature of the value function to the left of an individual's reference point. Or somesuch.

It's an interesting way to structure the book, as opposed to the typical approach of tackling one topic (say menu design or the fallibility of real estate agents) and then presenting all the related research in one chapter. One advantage to the approach in Priceless is that the latter, topical chapters are all really short, averaging just 3 or 4 pages each. I think this will make it a pretty good reference book and I enjoyed it overall, but any recommendation has to come with the caveot that you should know what you're in for. ...more

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Apr 09, 2011 Julie rated it liked it · review of another edition

Shelves: business-and-society

Oscar Wilde once said, "The cynic knows the price of everything and the value of nothing." William Poundstone might argue that the average person doesn't know the price of anything, either. Or, rather, that prices are arbitrary constructions that aren't really based on value at all.

Priceless is a foray into behavioral economics and social psychology as they apply to price and money. A lot of the research Poundstone brings forward I knew about already, and giants in the field (such as Tversky, Ka Oscar Wilde once said, "The cynic knows the price of everything and the value of nothing." William Poundstone might argue that the average person doesn't know the price of anything, either. Or, rather, that prices are arbitrary constructions that aren't really based on value at all.

Priceless is a foray into behavioral economics and social psychology as they apply to price and money. A lot of the research Poundstone brings forward I knew about already, and giants in the field (such as Tversky, Kaneman, and Ariely) are amply represented. But really, Priceless is a walk through our own minds and how we come up with the price we're willing to pay for things, especially when we have no reference points.

Taken together, the results of all this research could be disheartening. They show that people are easily manipulated by "anchors" (i.e. a reference number, which may be completely random), even while insisting that anchors have no effect on them. People will pay more for a steak dinner (or anything else, really) if there's a super-expensive option presented that no one buys. Just having the super-expensive $150 steak on the menu makes your $50 plate of chicken seem far more reasonable a purchase.

And on and on. Why did the jury award $2.9 to Stella Liebeck in the infamous "I spilled coffee on my lap" case against McDonalds? Because her lawyer suggested that the jury award punitive damages equal to "one or two days of the company's worldwide coffee sales." This is completely arbitrary (why worldwide? why coffee sales? why a day or two?), but it framed the question and led to a the multi-million dollar fine.

Priceless demonstrates that people pay astronomical prices for things they don't want. They'll claim one deal is better and yet consistently chose another. Their interactions with strangers change when there are other people looking, or even just a picture of eyes. Their preferences change drastically when even a small amount of uncertainty (1%) is introduced. Or when they're presented with something "free." And, through everything, they'll continue to insist that these criteria have absolutely no effect on them.

It's a fascinating read and worth it to know (and attempt to counter) your internal biases. Recommended. ...more

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Jul 03, 2011 Chad Post rated it it was amazing · review of another edition

Excellent summary of a ton of behavioral economics findings. Probably the best book in this vein that I've read, in part because Poundstone doesn't write like he has anything personal at stake--he's just sharing all this interesting info. In part because Poundstone's examples (almost every chapter opens with an anecdote or a portrait of an interesting figure) are so damn good.

The first half of the book lays out a few crucial concepts--anchoring, price coherence, etc., and the second spells these ...more

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Sep 16, 2013 Jenny rated it liked it · review of another edition

I would give this book 3.5 stars, not because of his writing style, but my personal preferences. Definitely some great stuff on economics and behavior psychology, but too dense on the descriptions of each and every study done over the years. I would prefer just to have the main takeaways of each. You can read a book summary of this one at Actionable Books: http://www.actionablebooks.com/summar... ...more

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Mar 10, 2020 AV rated it really liked it · review of another edition

For a psychology nerd like me, it was a great read. The book has detailed, experiments after experiments related to pricing, valuation (products), negotiation tactics (related to pricing) and other psychological concepts such as anchoring and prospect theory.

Couple of reasons why it was a little downer for me were,

- I bought it with an expectation to learn "how to price products", maybe based on real examples of the popular consumer products. Sadly, this wasn't to be found anywhere. In fact, on ...more

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Mar 21, 2018 Graylark rated it really liked it · review of another edition

This was interesting and informative as fuck. Not just for marketers (although it is tremendously useful for the field), but for the everyday consumer.

Every chapter was peppered with anecdotes and case studies where you saw people acting in peculiar ways according to internal prompts they didn't know they were following. The author then explained what the researchers extrapolated from that, and the resulting rules of thumb for pricing/ marketing.

Perhaps the only criticism I can offer is that s ...more

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Dec 17, 2020 Warren Mcpherson rated it liked it · review of another edition

Shelves: people-at-work, markets

An exploration of the psychology of pricing. The book lays out some high-level theories that relate to pricing and then details experiments that show some interesting features of human behavior as it relates to pricing and value. There are some interesting nuggets about how people react to the idea of fairness and how many elements of consumer experience are manipulated. It's a bit hard to put your finger on a central insight, the book sort of ends with a shrug.
...more

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Apr 17, 2019 Patrick Stuart rated it liked it · review of another edition

This is an interesting book about price.

Its written for business people. Chapters are short and punchy with a form as regular as poetry; a set-up, investigation, explanation and then musing on meaning.

"One of America's longest-running Guy Grand pranks takes place every day just off 1-40 in Amarillo. A giant steer statue us blazoned with a sign advertising a FREE 72 OZ STEAK."

From here we descend into the Gospel of Poundstone, or more like the Torah of Poundstone as the Gospels themselves are mic ...more

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Apr 30, 2015 Unwisely rated it really liked it · review of another edition

Shelves: good-bus-book, political-economic, non-fiction, 2015

I remembered William Poundstone from the Big Secrets era. So when a goodreads friend mentioned this book, I thought I'd check it out.

It was both maddening and interesting. Basically, prices are meaningless; supply and demand is irrelevant to cost; and your cell phone bill is complicated on purpose. That's not much of an enticement to read it, but it discusses economic and neuroscience research in short, digestible bites. (With depressing results, but you probably already knew something was amis ...more

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Jun 12, 2010 Uwe Hook rated it really liked it · review of another edition

We are primates. Not homo economicus, as we pretend to be.
This is not a text book, more of an entertaining book spinning stories how marketers, scientists and companies exploit our weak mind each and every day. We're so easily fooled, it's mind-numbing.
We all have our biases and prejudices in all areas of life, and PRICELESS helps to explain how and why we may feel in a certain way about the price of Gucci bag, a pair of Jimmy Choos, and etc. The evidence provided is primarily anecdotal and not ...more

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May 16, 2011 Adam Wiggins rated it it was ok · review of another edition

Shelves: gave-up

A look at the psychology of how people perceive product prices. Some interesting tidbits: for example, that cereal manufacturers raise their prices by changing the size of the box and/or the amount of empty space inside; and after a trend of increasing or decreasing size has gone on for a while, then offering a new "value size" or "mini size" that returns to the original dimensions, but with a seeming justification for the price change.

But overall, it spent a lot of time on studies and ideas tha ...more

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Jun 02, 2015 Дмитро Булах rated it really liked it · review of another edition

Shelves: cognition

'Priceless' is neither an extensive theory of value perception nor even a marketers' guide to 'right' pricing but it's still a great book. It starts with a review of history of modern behavioral economics and then goes into recent studies of price perceptions. That in turn leads us to notion of multidimensional, culturally and personally conditioned price perceptions. That would definitely challenge your common sense view of how money and mind collaborate.
Especially recommended for D.Kahneman fa ...more

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Jan 04, 2011 Greg rated it did not like it · review of another edition

Couldn't get too into this one. I wish it hadn't been written as 40-odd short chapters and more of a continuous narrative. I also wish I had a unicorn. ...more

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Dec 26, 2019 Ajay Palekar rated it did not like it · review of another edition

Overall, was unamused and slightly bored by the book. Mislead by the tag-line and reviews. Didn't find much value in reading it and would not recommend. It's redemption lies in its wealth of examples of the mental quirks that could be exploited by marketers, but it lacks overarching structure or principles that could be utilized by aspiring marketers or now knowledgeable consumers looking to defend themselves. Other books also do a better job of speaking of these psychological and behavioral fla Overall, was unamused and slightly bored by the book. Mislead by the tag-line and reviews. Didn't find much value in reading it and would not recommend. It's redemption lies in its wealth of examples of the mental quirks that could be exploited by marketers, but it lacks overarching structure or principles that could be utilized by aspiring marketers or now knowledgeable consumers looking to defend themselves. Other books also do a better job of speaking of these psychological and behavioral flaws.

The book is lacks any coherent point, structure, or thesis. It is a bombardment of examples ad nauseum of a few simple points. Do we need more proof that a single chapter to capture all the lessons this book has to offer? Perhaps, the various examples are interesting or at least memorable enough to be useful. But it is some combination of annoying, boring, and pointless to hear about different variations of the ultimatum game in so many of the chapters.

A review by Daniel Kahneman calls the book "Instructive and entertaining. It will leave you amused, smarter, and wondering what money and prices really mean." Perhaps this is an example of two economists scratching each others back [Poundstone speaks highly of Kahneman in the book and perhaps they are friends] But the review was highly misleading. This book did not leave me amused, smarter, more knowledgeable or curious about the nature of money and prices. The dive into behavioral experiments was to shallow to dig into the deeper questions, but by no means is easily digestible for a layman's audience.

The tag-line of this book "Discover the hidden secrets of pricing and how to use them to your advantage". Perhaps this book did indeed, reveal some quirky marketing tricks that retailers use to trick consumers. But, it doesn't really act as a guide to those hoping to 'use them to your advantage' or really explain how consumers could protect themselves. In that way, the book ends up being highly unactionable and lacks significant to most potential readers.
...more

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Oct 19, 2016 Sid1983 rated it liked it · review of another edition

Shelves: purchased-amazon, psychology

on ON

Prices, anchoring & other price related heuristics
Buyers are mainly sensitive to relative differences, not absolute prices
==> relative valuations are stable and constant while absolute price levels can be wildly arbitrary

Price is context dependent — that’s why anchoring is a thing
In fact, anchoring happens subconsciously and even if warned about it, subjects seem to adjust insufficiently for it
Can you then really push the envelope and come up with a crazy anchor? Old theory suggested ...more

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Oct 15, 2018 Alok Kejriwal rated it it was amazing · review of another edition

This book IS PRICELESS!

I haven't read a book like Priceless by William Poundstone in a long, long time. Now, I've been reading many books (have even written one) & have shared some of my extraordinary finds, but Priceless IS 'Priceless' for many reasons:

- The sheer scope of applicability! You can read AND use this book almost instantaneously in everyday life.
- The sheer volume of real-life examples, case studies, experiments and business applications makes this more of a textbook more than a co ...more

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Aug 02, 2019 Terry Koressel rated it really liked it · review of another edition

Priceless was not priceless...but, absolutely, it is an outstanding book on the psychology of pricing. With pricing becoming a near science in some business sectors, Priceless offers an invaluable perspective. It's main premise is that the economic view of pricing....as the equilibrium between supply and demand forces...is lacking in that it does not take into account the human mind with its biases, its logical shortcuts, its need for comparative information and its vulnerability to manipulation ...more

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Jun 18, 2017 Suhrob rated it it was amazing · review of another edition

Is it really wort 5*? Probably not.
But.

Priceless is just another book from a throng of multitudes of reams of heaping piles of tomes based on Kahneman & Tversky program (with significant additions from Thaler/Sunstein and Ariely et al. in this case) and subsequent research (not a negligible part of which is now in serious replication perils).

So why 5*?
1. Poundstone is just really good.
2. He doesn't think you are a complete idiot (not that this is some heavy stuff, but there are things that woul ...more

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Mar 27, 2018 John rated it liked it · review of another edition

Shelves: anselm-house-background

This is not so much a book as a collection of very short (1-5 pages) analyses of pricing experiments done throughout the 20th century. The early chapters make up a short history of behavioral decision theory, and the later chapters examine this field in various situations (buying and selling cars, salary negotiation, etc.).

Perhaps the one great takeaway from this book is the concept of anchoring, or the first number offered in a sale/negotiation/conversation. The mere introduction of a first num ...more

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Mar 20, 2020 Katherine rated it really liked it · review of another edition

Shelves: science, nonfiction

Priceless is one of those books where you find yourself every few pages looking around for someone to tell about what you just read. (Now imagine that sentence written well.)

The psychology of how we assign and evaluate prices, it turns out, is kind of wild stuff. It's shocking to what degree suggestions and even random environmental cues influence our thinking about anything related to numbers-- price, quantity, size, etc. And Poundstone's writing is approachable and fun. To be honest, Pricel ...more

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Jul 06, 2018 Louise rated it it was ok · review of another edition

Shelves: psychology

I made it halfway through but the author’s obsession with the probabilities of decision-making (i.e., behavioural economics) is pretty tedious. I’m just not convinced that a probabilistic approach to decision-making research helps us understand human behaviour, even when the approach shows that humans don’t make the most probabilistically advantageous choice (e.g., that we aren’t the rational beasts that traditional economists would like to think). This approach assumes that financial outcome is ...more

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Feb 19, 2019 Warren Paris rated it really liked it · review of another edition

Clear, for the most part, in explaining that people are inept at knowing value.
The fictional value attached to money is being used to exploit the regular person.
It is a useful tool for those looking to be more adept at saving a little more when purchasing. Also, noticing scams can be easier.

One way to realize this is just by looking at the prices for goods on Amazon and in Walmart. The prices are marked up so much compared to the purchase price. Since people have no value for their time or mon ...more

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Jul 08, 2017 YHC rated it really liked it · review of another edition

Consumers are often blinded by the price/ number, ignoring the true value of the product they paid.
Moreover, discount price tags with the comparison of original price play a successful trick to push consumers to buy impulsively. I am already immune of consumer impulse for long time, i only buy what I need not what i desire. This book used many interesting terms for me to understand more of consumer behaviors with many examples which are good for those who want to get out of the tricks to learn. ...more

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Oct 13, 2018 Mostafa rated it really liked it · review of another edition

This book is not offering a standard pricing schema that you can use in your business because there is None actually.
The book is a great introduction to the factors that MAY controls customer's interpretations of the price tag on a product or a service. but you will need to following your reading with other books discussing and explaining psychology in general and the behavioral economics specifically.
the Author has gone through many theories and explained them very well through the book and lis ...more

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Oct 09, 2020 Robert Gebhardt marked it as dnf-might-revisit · review of another edition

Shelves: behavioral-econ, econ, psychology

It turns out that spending a couple of years studying behavioral econ, behavioral finance, and behavioral (fill in the blank), and reading Daniel Kahneman, Richard Thaler, Dan Ariely and the like, pretty much covers most of what this book seems to offer.

I'm only 50 pages in, but that's my impression, and skipping ahead I see the obligatory Ultimatum game, prospect theory, and other points. I might come back to it if I want a rehash.

I expected this book to be more business-related, so this migh ...more

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Aug 16, 2018 Graeme Newell rated it liked it · review of another edition

This book was a collection of many short articles on individual research studies done on the science of persuasion and pricing. Its lack of a narrative structure made it a bit disjointed and hard to follow.

Mercifully, the author was fairly clever and entertaining. I was a bit surprised to see a science guy with so much writing talent. :)

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Jan 07, 2019 Victoria rated it it was amazing · review of another edition

Intriguing book that covers many theories that influence retailer's pricing strategies for consumer products. Poundstone elaborates on studies that support prospect theory, loss aversion, extremeness aversion, and many others. Would recommend this book to those who believe that fair value is easy to determine - it may prove you wrong :) ...more

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Jan 04, 2018 James rated it it was amazing · review of another edition

This book offers clear information on how to price your goods and services. The secret is in the psychology of value, which the author does a great job of presenting. Any business owner will be well served by reading this book.

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Aug 08, 2019 Margarit (Mark) Ralev rated it it was amazing · review of another edition

Useful book for sure.
No matter if you develop your own business or you are just a consumer - it's weird not to be interested how the prices all around you are formed and how much the things actually "cost" in the heads of everyone. ...more

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About William Poundstone

William Poundstone

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William Poundstone is the author of more than ten non-fiction books, including 'Fortune's Formula', which was the Amazon Editors' Pick for #1 non-fiction book of 2005. Poundstone has written for The New York Times, Psychology Today, Esquire, Harpers, The Economist, and Harvard Business Review. He has appeared on the Today Show, The David Letterman Show and hundreds of radio talk-shows throughout t ...more

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“One of the things that price consultants have learned is that what consumers say and what they do are not the same thing.” — 1 likes

“Many people like myself who teach marketing start the course by saying, ‘We’re not about manipulating consumers, we’re about discovering needs and meeting them,’ ” said Eric Johnson of Columbia University. “And then, if you’re in the field awhile, you realize, yes, we can manipulate consumers.” — 1 likes

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