Saturday, November 05, 2005

Million Dollar Idea #906

I was reminded the other day about a conversation I had with an old undergraduate professor of mine. He insisted that greeting cards were Giffen goods--you buy more as the price increases. He reasoned that because the price is printed on the back of the card, people fearing being called cheap by a loved one go for the higher price.

What he's missing, of course, is that such reasoning is not holding all things equal. The value of the card went up because the price went up, thus they are completely different goods. The same could be said of shopping at buying designer jeans rather than Old Navy--the price has inherent value; it sends a signal.

Pushing the point even more yields a wonderful business opportunity (assuming my prof's greeting card purchasing concerns are common). Make very cheap greeting cards with a fake price on the back: say five dollars. Then, at the factory, put a sticker over the fake price with the real price on it: say fifty cents. Add instructions on the sticker: "Peel To Impress."

The only problem is success will be the mark of failure as brand name trumps all. But you could always come up with fake brand names and then put the real brand name on a sticker, too. It's genius!

Want more? Send me fifty dollars.


jeremy h. said...

I like this quote from Alchian:

"The public's association of higher prices with quality is a consequence of the law of demand, not a refutation of it."

David said...

Good old Alchian. Btw, that's a cool shirt.

jeremy h. said...

How do you know I'm wearing a shirt? Oh, you mean in the picture. Yeah, thanks. I think.