The emperor’s naked

Or, “This is why I’m cheap.”

There are many factors that go into the price of a consumer product. The only one I willingly spend more on is marginal cost of production. That is, how much it costs to make one more unit of the item. This factor includes things like cost of materials, labor, electricity to run the factory, etc. In most cases (i.e., besides in the case of inefficiently produced goods), marginal cost of production is directly correlated with quality.

Wine is a good example of this. Did you know that even wine experts can’t tell expensive from cheap wine? Or that people report wine tasting better just because they’re told it’s expensive? They aren’t lying: the increased pleasure shows in their brain scans. Here’s the solution to the wine problem: have your friends bring you cheap wine and tell you it’s expensive. Do the same for your friends.

Here’s another great example:

3431_a2_eames_hang-it-all_coatrack

The MSRP on this designer (Eames Hang-it-all) coat rack is $199. But on Amazon, you can find one that looks similar for about $35. It’s even lower on Alibaba. We can assume the marginal cost of production is less than $30. Why does the original cost 6x as much? If there is really a noticeable quality difference, that would be fine, but for me, that would justify a price difference of 2x at most. Is it that the designer gets a royalty? Again, that would be fine, if most of the markup went into the designer’s pocket. However, I don’t think that happens. So why the price difference?

Here are things I won’t pay extra for: advertising, exclusivity, gimmicks, company bloat. I especially won’t pay for what I’m guessing is the most common reason things are overpriced for what they are: no reason at all. Simply to line the pockets of whoever is selling the overpriced things.

I wish the price tag of each item included MCP (marginal cost of production), so we could all be informed consumers and know what percent of our purchase price is pure bullshit.

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