Why on line prices can mislead

Cars for sale

On line markets where people sell peer to peer – think eBay sellers, or used cars on line –  can trick our perception of the price of things. Here’s why:

This is the advertised price, not the price it sells for.

When we compare similar items on line, we are more likely to see the price of things that haven’t sold yet. The price people actually buy at, is often not advertised long enough for comparisons. This means the real value of something is often much less than we think. Especially when we are looking to sell something we own. We are weirdly programmed to think items we own are worth more than they are. 

You might notice a car like yours is advertised for $20,000. There may even be multiple advertised at this price.  Other sellers also see the most common price and follow the market. But we need to remember these are the cars which ‘haven’t sold’ – those that sold probably did so at $17,ooo and are no longer listed. It’s the overpriced stock that creates our price perception.

Why does this matter? Because it is counter intuitive, the opposite of what we’d expect. It’s the filter bubble in action. The more we see homogeneous products with price X on line, the more we should remember it’s the price people hope for.

You should totally read my book – The Great Fragmentation.