The wine delusion

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For the sake of justification Do people like what they like, or do they like only what they expect to like? How much of our preference is already decided even before the first sip? The behavioural economist Dan Ariely asked the question, ‘Do we dislike what we expect to dislike?’ Dan Ariely’s team tested beer with a dash of vinegar on college students. When the students were told about the vinegar before they drank the beer, 70% didn’t like it. When the students were told about the vinegar after they drank the beer, more than 50% liked it. The test tells us that expectations not only change what we think we should enjoy, but significantly changes our experiences itself (Ariely et al., 2006; Berdik, 2012). Marketers spend billions on advertising to craft emotional appeals towards brands. But prices are just numbers. People assume that expensive stuff is better. Behavioural economists call this principle, ‘pricequality heuristic’ (Berdik, 2012). Berdik (2012) feels that people use price as a guide. That is, if something is expensive, then it is likely to be of higher quality than something that is cheaper. Hence, people tend to justify a pricey product. Basically, they follow the crowd, and end up paying for the premium like everybody else does. Quality expectations may be fairly accurate on products with available objective measures of quality. For experiential goods such as wine, the pricequality rule is less accurate (Berdik, 2012). The unnatural Unlike many of our basic consumer biases, the belief that price signals value isn’t evolutionarily natural. The American economist Laurie Santos has done years on research 8
on this area by teaching monkeys to use money. Santos’ (2006) ‘monkeynomics’ research found that monkeys share most human consumer quirks . Like humans, monkeys fear potential losses more than they value potential gains of the same size. Behavioural economists call this principle, ‘lossaversion’ (Bendle & Chen, 2013, p. 18). Like humans, monkeys value something more once they own it than they would before owning it. Behavioural economists call this principle, ‘endowment effect’ (Bendle & Chen, 2013, p. 4). The only thing monkeys don’t seem to share with us is the pricequality heuristic. Monkeys seem to understand what price means, but are not affected by price in the same way humans are. They know more quantity would cost more. They know to buy their favourite treats on sale. But, they don’t think one treat is inherently better just because it costs more (Santos et al., 2006). Which suggests that our overestimation on price may not be as deeply ingrained as other consumer biases. Meaning, our expectations on price can be easier to overcome. Or as Santos (2006) puts, ‘if we just have the right experiences and pay attention to our real preferences.’ The flight from expectations So, people like what they expect to like, and their preferences can be fundamentally influenced by price and labels (Thornton, 2013). But, what really are our preferences? Have our real preferences been swayed by critics, society and others? Are preferences shaped by our own expectations the only preferences we have? Turns out, dividing real from shaped preferences is hard (Berdik, 2012). Research from the economics faculty of Stanford and Caltech found that pleasure from expectations is real. Subjects were told to 9
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The wine delusion

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