Ok, so let’s say that you walking down Ratchadamri in Bangkok, looking for some juicy grilled chicken. You come across five grilled chicken stands in a row. Customers view the chicken stands in the same sequence, from 1 to 5, but do not necessarily view all five chicken stands before making a purchase. If you were to be a chicken vendor, which position would you select for your chicken grilling business? Assume that all of them have equal quality chicken and at an equal price. Write a number between one and five using your index finger on the table. This will embed your selection in your memory and prevent you from backtracking and changing your mind.
Do it.
Now.
Now, before I tell you the answer (or my answer, which may or may not be right according to someone else’s version of game theory), I have to tell you that, for reasons which I may or may not wish to discuss here, it appears that I will soon no longer be writing up specific stocks on this blog. I will probably write from time to time about how it feels to be the only person shorting the US market and about my fascination with the Turkish lira, while somehow tying this all into Japan.
Also, I was going to write up one Japanese accounting software stock here, but I think I need to increase my position before I do that. If I were you, I would look into Japanese accounting software stocks.
The answer to the question, is that it is a trick question. If the going price of grilled chicken legs in Bangkok is 50 B, and if the first chicken stand that customers come across has chicken at 30 B (as do the other four), then they will likely quickly go for the first one, assuming it is a great bargain in the belief that the value of shopping around is low. If you selected the first one but did not anticipate this, then that means your selection was probably based on a mental bias not grounded in anything in particular.
If, on the other hand, the going price in Bangkok is 50 B whereas the chicken stands are all at 70 B, then punters will not stop at the first stand, will check the second stand, find that the price of the same but still feel that it is expensive, go to a third stand find that it is still the same, and then assume that it is a standard and buy from the third stand. Some people will be stubborn enough to go to the fourth stand, and a smaller proportion until the fifth; however, if the price is extremely high (say, 120 B), then most people will go to the fifth stand.
P.S.: If anyone has Harold Schulz’s direct number, please let him know that we got the message about Christmas etc. and he can dial down the seasonal flavour a bit and we will still buy his coffee.
{ 0 comments… add one now }