Be it for a commodity (like gas) or for something new like Apple iPhone or Amazon Kindle.

In case of a commodity offering, the baseline is always the price for a period in history. So if the price of the gas was hovering around $2 for a while and touches $5 and then goes back to $3, the increase from $2 to $3 is forgotten. What is remembered is the decrease from $5 to $3 – sounds like a bargain.

In case of new offerings like iPhone and Kindle, there is no precedence. So the best would be to set a higher price first and then get all the early adopters to get in the game. The people on the fence are waiting for the price to drop and after some time give them what they want – drop the price. Make it look like a SWEET DEAL and expand the reach.

Think about it. Apple says “iPhone 3G is twice as fast and it is half the price”

Or, in other words, the earlier version of iPhone was “twice the price for half the speed” as compared to this version ????

What can we do?

Actually, nothing. That is the way mind works.

The real question is whether you need any of those products. The reason to buy them should not be because there is a DEAL there but because you need it. If you can prove the ROI, then the price differential really does not matter…I think!