HOW TO SELL $ 20 FOR 200 OR EXPERIMENTS WITH THE PSYCHOLOGY OF THE MARKET
Do you know how to sell a twenty-dollar bill, not at face value, but for two hundred? Not everyone knows, but Professor Max Baserman knows the secret. He has already got his hands on the annual auction at Harvard Business School, which he himself organizes. This is a kind of practical guide for the study of the psychology of the modern market.
The terms of the auction are as follows… a twenty-Dollar bill is put up for auction. Participants can offer any amount for it, but there is one significant nuance. It is that Bazerman requires the second person after the winner of the auction, who bought $ 20, to give the amount of his offer. What for? That’s the point.
No one wants to lose, let alone be number two. Since the second not only loses, but also remains in a specific minus. Speaking about the history of this auction, it should be noted that the auction passes for the amount of $ 20. That’s when the fun begins. There are two players who do not want to give in to each other, because the number two will remain in a catastrophic loss. An interesting fact is that no one has ever bought a banknote for twenty dollars. Paradoxical rate – for 20 to pay more, but these are the laws of the modern market, pronounced in this model.
THE SECRET PSYCHOLOGY OF THE MARKET?
In this experiment, often observed moments of transition rates for 50, and after – for a hundred dollars. But the record auction Bazerman 20-weave was an amount of 204 USD. This training-auction Professor successfully conducts not only with students but also with financial workers in refresher courses or special seminars. The result is the same! Praise to the merciful and non-greedy teacher for the fact that he spends this kind of earnings for charitable purposes.
What is the secret of financial psychology of market participants? Let’s try to understand the theory. In human nature inherent instinctive syndrome (loss aversion) a fear of loss. At loss of money the person shows inadequate behavior, a certain confusion and irrationality in acts.
First we “enter” for free cheese in a mousetrap. But every person in this situation is well aware that more than $ 20 no one will give. Just at this stage of the auction of the race went by many participants. And then comes the moment of manifestation of loss aversion. About somewhere before the $ 16, when a person, afraid of losing money, quickly adds the amount of the bet. And enhances the fear of losing – competition.