The value of a discount
When money off is worth more than money alone
What is the last item you bought? Maybe a coffee, a pack of bin bags during your weekly shop, or a vacuum cleaner. What was it worth to you?
That is a question which is hard, if not impossible to answer. But one thing we can fairly safely assume is that its value in your eyes was at least the amount you paid for it. Otherwise you would simply not have bought it, would you?
When traders buy goods for a certain price, they are not interested in keeping these items. To them, the so-called surplus is entirely represented by the margin they expect to make when they come to resell the items. But end users like you and me are not intending to sell on our coffee, our bin bags or our vacuum cleaner at a profit. To us it is not the direct economic value, but other aspects of what we buy that represent our surplus.
What the price tells us
If — as is sometimes the case — we don’t buy the cheapest item in a particular category, there has to be some extra utility about the item we acquire that justifies the higher price. The enhanced enjoyment of a shot of flavoured syrup in your latte might outweigh the extra cost, for example. Maybe we’ve had a bad experience with a bin bag tearing, and the more expensive, branded variant…
