Comments on: Garmin 405 Endowment Effect http://runcolo.com/blog/garmin-405-endowment-effect/ Colorado Race Reports, Colorado Runner, Colorado Running Race Reviews Tue, 06 Jan 2009 06:11:47 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Neil http://runcolo.com/blog/garmin-405-endowment-effect/comment-page-1/#comment-354 Neil Sat, 13 Sep 2008 20:53:33 +0000 http://runcolo.com/blog/?p=169#comment-354 Surely, however, it does not matter what value you personally place on the item, unlike pure opinions, there are undebatable facts behind things like this. The Garmin 405 IS better than the 305 in several areas and that is not up for opinion. Rather, the question revolves around whether the Garmin 405 is worth $150 more than the 305 in current market. Undeniably, according to facts, the 405 should be worth more than the 305; but how much? As far as economic and munitary value is concerned the 405 IS over-priced; but it is a calculated cost made by the company and this over-pricing is quite deliberate. It is not so high as to put everyone off, but not so little that it puts those off who want to feel like they have the best. If it was only $10 more than the 305, some would say, why not, whilst others would say why bother, because the fact that the 405 then would only be marginally more expensive makes its personal value deplete. Furthermore, it makes it more unlikely that the first product would be bought. The method employed ensures that the higher technology is DESIRED whilst being argued about, whilst those with money buy the best (because the price tag makes it appear the best) and those without wait until the price is dropped, without making the initial technology (where no doubt there is a surpless of stock) redundant. The same thing will happen when the 505 comes out. It has little to do with the 'endowment effect' and everything to do with the 'endowment effect'. Though consumers justify their choice because they own the material, there would be no justification without an argument, and that argument is set-up by the companies setting a price margin in the way they do. If the Garmin 405 was valued justly in relation to its technological advancements and the fact that it is smaller and therefore more aesthetically pleasing (because it is less bulky) the product would be priced a lot less than it actually is. But if this were the case there would be no argument and people, whether they originally bought the 305 or not, would feel no 'endowment effect' because the 405 would be a valid alternative always. Because the 405 is so much more expensive than the 305 sets up an argument, ensures people buy the 305 because of personal values of their own (what you call the 'endowment effect') and ensures than others buy the 405 because they want to feel that they own the best. End result, the company has people talking about their products and debating their value giving them profile. The company can get rid of cheaper, but still profitable, older stock. The company sells a few newer stock but is currently developing the newer modal and waiting for the 405s price to drop so they get more buyers as the cycle repeats. But in regards to your initial points that reveiwers are more likely to give a product a good reveiw if they are provided with free equipment. Or that they are more likely to give a good reveiw if they are paid for it. My question is, why label this as 'endowment effect'? Surely it is common sense that they would, especially in the hope for further deals, wouldn't you? My other point is that you say that the fact that the 'endowment effect' exists minimalises objectivity in a review. I have never seen a review that is 100% objective, because almost nothing is objective. People make up their own minds (within a set of social boundaries, rules and, to an extent, one may argue, not always), and that is the point entirely. Surely, however, it does not matter what value you personally place on the item, unlike pure opinions, there are undebatable facts behind things like this. The Garmin 405 IS better than the 305 in several areas and that is not up for opinion. Rather, the question revolves around whether the Garmin 405 is worth $150 more than the 305 in current market. Undeniably, according to facts, the 405 should be worth more than the 305; but how much? As far as economic and munitary value is concerned the 405 IS over-priced; but it is a calculated cost made by the company and this over-pricing is quite deliberate. It is not so high as to put everyone off, but not so little that it puts those off who want to feel like they have the best. If it was only $10 more than the 305, some would say, why not, whilst others would say why bother, because the fact that the 405 then would only be marginally more expensive makes its personal value deplete. Furthermore, it makes it more unlikely that the first product would be bought. The method employed ensures that the higher technology is DESIRED whilst being argued about, whilst those with money buy the best (because the price tag makes it appear the best) and those without wait until the price is dropped, without making the initial technology (where no doubt there is a surpless of stock) redundant. The same thing will happen when the 505 comes out. It has little to do with the ‘endowment effect’ and everything to do with the ‘endowment effect’. Though consumers justify their choice because they own the material, there would be no justification without an argument, and that argument is set-up by the companies setting a price margin in the way they do. If the Garmin 405 was valued justly in relation to its technological advancements and the fact that it is smaller and therefore more aesthetically pleasing (because it is less bulky) the product would be priced a lot less than it actually is. But if this were the case there would be no argument and people, whether they originally bought the 305 or not, would feel no ‘endowment effect’ because the 405 would be a valid alternative always. Because the 405 is so much more expensive than the 305 sets up an argument, ensures people buy the 305 because of personal values of their own (what you call the ‘endowment effect’) and ensures than others buy the 405 because they want to feel that they own the best. End result, the company has people talking about their products and debating their value giving them profile. The company can get rid of cheaper, but still profitable, older stock. The company sells a few newer stock but is currently developing the newer modal and waiting for the 405s price to drop so they get more buyers as the cycle repeats.

But in regards to your initial points that reveiwers are more likely to give a product a good reveiw if they are provided with free equipment. Or that they are more likely to give a good reveiw if they are paid for it. My question is, why label this as ‘endowment effect’? Surely it is common sense that they would, especially in the hope for further deals, wouldn’t you?
My other point is that you say that the fact that the ‘endowment effect’ exists minimalises objectivity in a review. I have never seen a review that is 100% objective, because almost nothing is objective. People make up their own minds (within a set of social boundaries, rules and, to an extent, one may argue, not always), and that is the point entirely.

]]> By: RunColo http://runcolo.com/blog/garmin-405-endowment-effect/comment-page-1/#comment-138 RunColo Fri, 20 Jun 2008 14:42:13 +0000 http://runcolo.com/blog/?p=169#comment-138 Crossn81, You're right about race reviews. I think the reason is because people can see that a race review is truly a sunk cost, they ran the race, it's over with, no way to get your money back. When you possess an object it remains with you, thus for self justification purposes you will rationalize that you made a smart decision. To be truly objective you need to do a consumer reports type review, where you do not own the product, but are only testing it. Crossn81,

You’re right about race reviews. I think the reason is because people can see that a race review is truly a sunk cost, they ran the race, it’s over with, no way to get your money back. When you possess an object it remains with you, thus for self justification purposes you will rationalize that you made a smart decision.

To be truly objective you need to do a consumer reports type review, where you do not own the product, but are only testing it.

]]> By: crossn81 http://runcolo.com/blog/garmin-405-endowment-effect/comment-page-1/#comment-137 crossn81 Fri, 20 Jun 2008 12:11:59 +0000 http://runcolo.com/blog/?p=169#comment-137 That is a very interesting perspective. I hadn't really ever thought of the fact that we are all biased in our reviews because we own what we are reviewing. It does make sense that unless we are "expert reviewers" we limit our negative reactions. I will say though that if a person has nothing bad at all to say about a product I tend to disregard the review more than a thoughtful one that includes something negative. (I'm currently looking at digital cameras) Interestingly, I don't think this plays into race reviews as much as product reviews. What do you think about that? That is a very interesting perspective. I hadn’t really ever thought of the fact that we are all biased in our reviews because we own what we are reviewing. It does make sense that unless we are “expert reviewers” we limit our negative reactions. I will say though that if a person has nothing bad at all to say about a product I tend to disregard the review more than a thoughtful one that includes something negative. (I’m currently looking at digital cameras)

Interestingly, I don’t think this plays into race reviews as much as product reviews. What do you think about that?

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