Testosterone and Money

[Texas Proud]

That happens all the time, and somehow it doesnt get out. Nobody pays the same price.



I was a pretty big fish...5th largest US company by market cap. One company that chose to walk rather than give me a good deal lost their business when a bunch of other companies saw that we had changed products...and they all followed suit. The competitor waived the charges for their software and just charged us for support...and picked up all the other defectors as well. We paid them pretty good money for the next 7 years...not as well as if we'd paid full price for everything...but they made a lot of money and a good profit.

Its all about continued and ongoing repetitive business. But thats not the way its done today...its 'get your big hit now, then dump these bozos, and we'll spend $100M in advertising to get some more of them!'.

Pennywise, pound foolish.

Agree with you on this... mine was different... they wanted a very cheap price, not one that was a small discount... and there were people willing to undercut all the time... however, we gave good service and it was such a small cost in the whole that the service level mattered more than the price.. The CFOs did talk to each other and they did find out if there was a price drop.... and they would ask for it... ours was an annuity business...

My friend had a saying 'swallow a camel and gag on a knat'... your example is similar... sell it for less than cost, but make up for it in volume....

 

[cute fuzzy bunny]

I guess its all capitalism...one company would rather have nothing than something to preserve their business by losing a lower profit customer...the other would rather have something than nothing to grow their business by picking up a profitable customer.

 

[ladelfina]

The companies that tried to get discounts from us were also always the most horrible to work with in all other respects. Many times the "carrot" was offered of "more work down the road" if we would only do this or that for a discount "just this once". We quickly learned that this was almost always a lie; they got their discounts and finally moved on to the next sucker. They weren't interested in a mutually-profitable long-term relationship, just a one-night-stand where they were the screwer and we were the screwee. We quit hanging out in that bar.

Another curious thing about these experiments is that they usually involve small sums and I wonder to what degree that distorts the outcome. What if the pot is $400,000 and someone offers to split it by giving the other participant $50,000, rather than $40 and $5? It's easier to perceive $5 as being insultingly low.

As for the car thing.. WAMH..how do you come to this "high principles" conclusion, when you say your DW's intent was to 'punish' the woman (whose car was hit!)? Seems like you both wanted to 'punish' her, but you just couldn't agree on how!

 

[eridanus]

Another curious thing about these experiments is that they usually involve small sums and I wonder to what degree that distorts the outcome. What if the pot is $400,000 and someone offers to split it by giving the other participant $50,000, rather than $40 and $5? It's easier to perceive $5 as being insultingly low.

Richard Thaler, an economist at Chicago, did some meta-studies of the Ultimatum game.

Anomalies at the Chicago Graduate School of Business

He mentions a discussion with his fellow economists at a conference. What if the pool was $1,000,000? One economist insisted he would still split it fairly, because you never know what kind of nut is on the veto side.