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Price vs quality

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Price vs quality – How to decide?

Lecture by Magalì Fia at the Faculty of Social Sciences of the University of Trent. October 13, 2018. “Common

Conference by Magalì Fia at the University of Trent on purchasing decisions - price vs quality
Conference by Magalì Fia at the University of Trent. photo by Chiara Andreatta

Mistakes in Daily Decisions – from Misunderstandings to Reality”

In the previous paper entitled “Economics and introspection” , we have we have highlighted that the study of economics allows us to check the convenience of our decisions. If applied to individual decisions, it helps to determine the price to pay for the quality we get, and to bring us back to our goal.

But let’s see how economics can help us in purchasing decisions (buyer decision process). We highlight how, if we don’t find a balance between price and quality, we risk giving too much importance to appearance and acting absurdly.

Eye-catching products

Let’s see the techniques of marketing/promotion of products. These techniques show how to package and position the product to catch the customer. Many companies master these skills and the others remain disadvantaged. These techniques make the product more attractive, but not always a beautiful aesthetic corresponds to an outstanding quality.

When the appearance of the product catches you, and you look more at its packaging than at its quality, you can have an unpleasant experience.

This happened to me last year during Christmas time. I went out to buy chocolate to eat with friends and family during the holidays. I bought an elegant chocolate composition, paying a high price for it. But when I got home, I tasted it and realized it was not tasting good. I was angry because I wanted some good chocolate to eat with friends and I got something that looked more like a “wooden sculpture”. It was edible, but not of quality.

How could I have avoided such a mistake?

What was my goal?

I could have stopped for a second, looked inside, and asked myself, “What’s my goal?” Buy a quality product or one that catches the eye? The goal I had was to buy chocolate to eat with friends and enjoy with them. I didn’t want to enjoy the beauty of a chocolate composition with them. The “lack of introspection” in purchasing decisions – not realizing one’s goal – has a cost: looking only at the form can cause an awful experience.

You may ask: is the goal to buy something good or get a nice product package? The citizen who chooses quality follows an economic principle. They evaluate the relationship between price and quality based on the goal they want to achieve.

A business choice

Entrepreneurs who don’t look at the balance between price and quality may have difficulties to sell their products. If I am an entrepreneur and have a restaurant that serves wonderful food at an average price, I should make my purchase choices following my goal: namely to provide an excellent product at an honest price. My supplier could offer me a high-quality product – for example, a special type of meat- at an exorbitant price. The product is appealing, but I know my customers wouldn’t pay a higher price for it.

Entrepreneurs should make their purchase choices following their goals. They should consider that a product with a too low or too high quality might have difficulty selling.

Magalì Fia

[1] This paper refers to the abstract definition of economy as the rational use of money (or other scarce resource), which aims to get the maximum profit for the same cost.

[2] On the “price to pay in individual decisions”, see also the introspective economy page by Luis Pisoni on this website.