You know what really grinds my gears? Over priced, eraser tip sized coral fragments. Often people justify these prices by the coral’s popularity–if the corals are overpriced no one would by them, right? There is some validity to that notion, but there is much going on here than what people perceive to be supply and […]
You know what really grinds my gears? Over priced, eraser tip sized coral fragments. Often people justify these prices by the coral’s popularity–if the corals are overpriced no one would by them, right?
There is some validity to that notion, but there is much going on here than what people perceive to be supply and demand. Price and value are two distinctly different animals. Unfortunately we understand price well; it hits our bank accounts. We often miss the value piece.
That’s because the invisible hand cures all… except for human stupidity. A large part of this coral stupidity has to do with arbitrary coherence.
I know a bit harsh, accept my apologies in advance, but this stupidity I speak of is not unique to any individual. As humans, we are wired this way; when it comes to value propositions, as in how many dollars am I willing to spend for this item, we’re pretty bad. [Especially in such a small, high friction market that is the ornamental marine livestock industry].
In brief, arbitrary coherence is when we make price anchors on items that are actually arbitrary. Paradoxically, they are also coherent because they effect our current and future valuation of items. If we set a high anchor, even if it’s completely unrelated, we are more likely to spend more money on another purchase.
Arbitrary coherence is often taught in psychology, behavioral finance, and marketing classes because of the power it can have over individual spending. [A popular MIT example is outlined here by Predictably Irrational author Dan Ariely, where the last digits of student’s social security numbers influenced the price they were willing to pay for wine.]
So how does this apply to corals? If the OMG LE Chalice coral is priced at $3,000–we have a very high anchor. By comparison, all corals less than $3K now look incredibly affordable. [Similarly, a few weeks later when that same overpriced OMG LE coral is on sale, it also looks like a steal.]
But here’s the catch–the initial price was completely arbitrary. In now way does a sub 1″ captive propagated coral fragment for over $1,000 USD reflect cost drivers such as relative rarity, market demand, survivability or overhead costs. It was just… a number. These extremely high prices are nothing more than marketing.
So before pulling the trigger on that expensive fish, coral or invert, remember to calibrate your pricing anchors. Don’t swing at the high balls and look at value adding factors such aquaculture, length of time in captivity, and customer service.