depends if the price change is above or below inflation.
if prices rise quicker than inflation you get less value for money
This comment isn’t addressing the “digital shinkflation either.
It’s not like the price change means you get the same service - most of the time they make it shittier
This, and the measurement of the perception of “value” needs to be taken into account.
I’ve been taught:
Value = Benefits received / Costs incurred
Costs can be price, time, energy, etc.
Benefits can be a physical product, an experience, a feature, or less tangible like peace of mind or security.
If you increase price, other costs must go down OR benefits must go up; otherwise value is lost.
And yes, it’s all perception. Benefits don’t affect all customers equally, and people place different value on their time, etc.
Your comment is spot on. I have just found this equation consistently holds up.
Not to nit pick, but that is basically a variation of ROI. Return on investment, or very similar at least.
Value is not necessarily a formula but a metric. Exactly what you described as benefits. I think that is the practically the same since perception of value is based on the benefits. And it is indeed all subjective perception.
To make it even more interesting, perceived value could be totally manipulated up while actual received (quantified) value goes down. That’s marketing. ;)
But yes, fun to theorize on this! :)
You’re not wrong! I think ROI would be the business side, while value is the consumer side.
In another response, someone told about a store that raised price on inexpensive mice, and they sold much more than when the price was lower.
My partner and I tried a new restaurant a couple days ago. He had fajitas, which was only something like $12. Normally, fajitas are more like $20. It was pretty good, not great, but something he’d eat again.
The cost was lower so even though the benefit (food quality) wasn’t as high as some places, the value was equal to what he gets at many other places.
But clearly value isn’t all, because next time he wants fajitas, he might decide he wants really good fajitas and go spend more. Or he might decide the cheaper ones are good enough to fill the craving and go there.
Anyway, perception is key here, and no one person can decide that for anyone else!
Inflation is a decrease in the value of money itself. If there’s a lot more money around today than there was yesterday, then money is less scarce than it was before. Scarcity is a major contributor to value by the theory of marginal utility:
Suppose you have no first aid kit. Gaining a first aid kit gives you a tremendous amount of value! Now suppose you get a second first aid kit. Still valuable, but not as much as the first.
Now you suppose you have a thousand first aid kits. What are you going to do with all of them? You can’t possibly use them all yourself! So you might as well give them away or try to sell them.
First aid kits have declining marginal utility. Having way more than one gives you very little value relative to the value you gained from the first one. On the other hand, those first aid kits will have much more value for other people who don’t have one yet. Thus it’s better to distribute first aid kits than to hoard them.
Most things work this way. One of the main exceptions is money itself. The more money you have, the more you can do with it! Of course, at large enough levels of wealth, what you can do for yourself personally (buy food, clothes, shelter, entertainment) shows the same diminishing marginal utility: being able to afford a steak dinner every day is one thing, but nobody is going to eat 10,000 steak dinners every day!
On the other hand, the other use of money is to hold power over others, and there’s no limit to that, unfortunately. The biggest problem is the existence of people who actually want that!
Not necessarily.
In theory if the price increases were at a slower rate than general inflation, the effective cost goes down. Additionally, they could add additional content, thus increasing the value of the provided service, at a rate greater than price increases.
In practice, yes Netflix and other streaming services have been becoming less valuable as time goes on because while costs have been driven up, available content has generally stagnated or even decreased as more media companies decide to open their own platform, pulling their content from the competition and diluting streaming value across the board.
