Subject: Re: Irrational customers?
From: "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp>
Date: Wed, 16 Feb 2000 16:05:53 +0900 (JST)

>>>>> "Brian" == Brian Bartholomew <bb@wv.com> writes:

    Brian> Stephen, if I heed your admonition not to care about profit
    Brian> margins when I'm buying, it should mean that I would do
    Brian> better (get more stuff for less money) in my own life,

No, it means you get the same stuff for the same money, and don't
waste energy worrying about things you can't do anything about, except
by shooting yourself in the foot (ie, boycotting the best-value vendor
because she's making more money than you do).

    Brian> right?  A piece of profit margin information may tell me
    Brian> that one seller is more likely to drop his price than the
    Brian> other.  How do I benefit from ignoring this?

The same way you benefit from ignoring any false information.

Given two vendors selling at the same price, one with a 5% margin and
the other with a 50% margin.  Which one do you think more likely to
cut price?  I have no idea, unless they are both price-takers (small
players in a competitive market)---in which case both will do (or will
be forced to do) the same thing.

_If_ you are in a one-on-one bargaining situation comparable to buying
a used car, then knowing the profit margin of the vendor may help you.
But in such situations you're buying a one-of-a-kind good, and you
need a lot more information anyway.  It pays you to carefully research
both the vendor and the good itself.  But in those cases, no vendor in
her right mind would reveal profit margins.  You have to get them from
the "blue book" or whatever.

But that's not the case you're talking about in your "experiment".
The idea of shopping on price/value implies that (1) there is a market
of several vendors, and that (2) value can have a market price (ie,
all customers perceive value basically the same way).  In that
context, profit margin information tells you nothing about what the
vendors are likely to do.

    Brian> Stephen writes:

    Brian> However, I think that's a weaker way to transmit the "whole
    Brian> truth".  The person picking and choosing the truths to
    Brian> present has a good idea what the customers will consider
    Brian> the relevant "whole truth", and she is willfully not
    Brian> providing it.

Brian, the whole point of your first post was that you acknowledge
that you don't know what customers want, because you offer them what
you think they want and they ain't buying.  Now you claim to know?

Methinks this is a contradiction.  And the height of hubris to pretend
to judge who's telling the truth better, when you can't define it.

    >> $2000 _gross_?  Man, I give that much to my church every month.
    >> Half will go to pay your tax accountant.  Why not just do it
    >> and call it charity?

    Brian> This was the intro to the group to prove I was for real.

In other words, you offered them an "honest business plan" that made
no business sense.  Why should they trust you?  You look like either a
swindler (I gather that what you meant by the comment about what you
are getting and would want for future work is that it's not included
in the $2000; this is a type of swindle called "bait-and-switch") or a
fool (possibly well-meaning in the latter case, but still a fool).

I know you're neither, just full of preconceived notions about
economics.  But how would your intended customers know that if they
don't read FSB?

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