Monday, June 25, 2012

Things are not always what they look like (Funny Video)

Good morning economists! Have you ever bought an item that was advertised as performing a particular task only to be disappointed? Let me tell you, I used to consume large quantities of the red bull energy drink when I was younger but, darn it, I never grew wings! Watch this short video and you will understand:

Our decisions are based on several factors that can be classified in one of two broad categories: retrospective and prospective. Retrospective factors are recollections from the past, reminders about how much we enjoy or dislike something, in other words our tastes. Prospective factors are our expectations of the results from performing a particular action. If we expect to receive enjoyment from a good or service then we will consider purchasing it. We would not even go anywhere near a product that would cause discomfort.

The purpose of marketing campaigns is to confuse the prospective decision factors of the consumer. They promise a high level of expected utility that may be realized (in the case of a consumer who is satisfied with a purchase) or remain unattainable (for consumers who are finally disappointed with the product). 

The best way to shield ourselves is to obtain as much information about the product or service we are considering to purchase. Gathering information will increase the probability of avoiding disappointment and save us money in the process.

Have a high utility day!


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