I just read Priceless: The Myth of Fair Value by William Poundstone.
This book is mostly useful as a lesson in how to be aware of sneaky marketing and advertising, or as I like to call it, Defense Against the Dark Arts. Like a Malcolm Gladwell book, you get the point in the first few chapters but keep reading because it's entertaining and a week after finishing it you can't remember anything about it.
The basic idea is that people are terrible at absolute value pricing and much more sensitive to relative pricing. Not shocking. For example, if I showed you a pristine-looking windshield and asked you what it was worth, you might throw out a guess like $500. If I showed you a windshield full of dents and scratches and told you it was worth $500 and asked you to re-price the nice windshield, you might say $1000, judging it to be worth twice as much as the nasty windshield.
Poundstone looks at examples of this phenomenon in jury awards, theater seats, phone bills, real estate, car sales, sitcom star salaries, restaurant menus, super bowl tickets, etc etc. And of course he surveys dozens of studies performed with hapless undergrads. One recurring scenario is called the ultimatum game. "You are given $10 to split with a stranger, and you get to propose how the money is divided-for example, $6 for me and $4 for the other guy. The twist is that the other person gets to decide whether to accept your split or reject it. Provided she accepts, the money is split exactly as you specified. Should she reject the split, neither of you gets a penny." Many studies performed versions of this game, and nearly every time the responders felt the offer to be unfair (ie $8 for proposer and $2 for responder), they rejected it because of the perceived unfairness, forgoing a free $2 for the sake of punishing the proposer.
The point is, money-related decisions and ideas of value are often based more on emotions and context than righteous objectivity, no matter how savvy you think you are. If you nerd out on game theory, you'll like this book. Poundstone spends a bit too much time chronicling and adoring the founders of behavioral economics, but I enjoyed it otherwise and would say that it's worth reading and/or skimming.
Poke through the book with this sweet google books embed:
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