Friday, June 25, 2010

Is that latte worth $4? You better believe it.

By Carol Clark

For years, I’ve stayed loyal to my cell phone: a basic candy bar model. Cheap. Great reception. Easy. Which explains why I was naïve enough to think I could go to the Apple store yesterday and pick up an iPhone 4. The hundreds of geeks who brought lawn chairs and books for the line snaking through Lenox Mall made it clear I was a novice at technical self-indulgence. So I went downstairs to Starbucks to console myself with a latte.

I checked my email and saw this article from U.S. News and World Report on 10 things to splurge on this summer (including an iPhone 4 and a trip to Starbucks for the new free wi-fii.) Validation of your purchases, and attempted purchases, is what you need when you’re sipping a $4 coffee.

What really drove it all home for me was the message from an Emory scientist quoted in the U.S. News article. Here's the excerpt:

Gregory Berns, a professor in the psychiatry and behavioral sciences as well as economics at Emory University, found that when people pay more for products that they believe enhance their mental acuity (such as coffee or energy drinks), then they are more likely to work. Berns identifies this as a "placebo" effect. Basically, it works because people believe it works. That means if you believe a $4 coffee will help you ace a test or perform well in an interview, then you should spend $4 on that coffee because it probably will help you.

"We have been conditioned to expect that higher prices equates to higher quality," explains Berns. "Therefore with a product like an energy drink, you expect the more expensive it is, the better it works."

But is a $4 coffee really better than a $1 one? It is if you believe it is, says Berns.

Your money and the herd mentality
Decisions, decisions: The biology behind the choices we make
Fork over your ideas

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