Value or Price?

A thought experiment:

I am successfully selling something at £500. I tell people that all day.

Then, an employee tells a customer the price is actually £100.

I am annoyed but then - as I am legally obliged to do - sell it for £100

Is the right price for the product £500 or £100?

 

This, give or take a few adjustments, was the question Professor Philip Cowley posed on Twitter recently. Cowley, whose speciality is politics, was obliquely referring to a debate the previous evening in the British House of Commons in which members of parliament had been given conflicting information over whether the outcome would or would not be a vote of confidence in the government which might potentially lead to a general election.

But, like a number of others, I treated the experiment literally, because it seems to me to relate quite usefully to wine. What is the ‘right’ price for a bottle of Burgundy or Napa Valley Cabernet? The amount you could have bought the then-current vintage for a few years ago, or the sum you would be asked to pay for the one that’s available today?

And what’s the right price for a new wine that’s just been launched and has no track record of its ageability or appeal in the secondary market?

The response I liked best came from someone called Edward Greening who simply said

“The price is £100, the value is £500”. 

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