As he looked up, Jesus saw the rich putting their gifts into the temple treasury. He also saw a poor widow put in two very small copper coins."I tell you the truth," he said, "this poor widow has put in more than all the others. All these people gave their gifts out of their wealth; but she out of her poverty put in all she had to live on."
Luke 21; 1-4
Recently i went to look at some property to build my own house (given the rising real estate prices, I wonder if my house is built on rock or sand- economically speaking). The market price in that area was around Rs.70k per cent (100cents = 1 acre), but I fell in love with the plot and was willing to pay asking price, Rs.84k. So what economic index marks the difference of 84-70=14k? Economics was never meant to answer this question. I call it EMOTIONAL VALUE
The problem with emotional value is that it brings a certain randomness to the system. Pricing incorporates this by taking Market Value. But we really need to take a closer look at Market Value. Lets take price per squarefoot of real estate. Market Value is based on the price that is applicable in the area. A building with a sea view may have a higher price per squarefoot overlooking the sea and lesser one without the view. This is, in a sense Emotional Value reflected in market dynamics. Brand managers know it well. They spend huge amounts of money building EV through advertising and brand building.
But EV is as specific as it gets. The plot that I saw has a particular Emotional Value for me which others don't have. Yet all fixed pricing mechanisms are unable to capture EV. Indeed my EV for a product maybe one at one time and a different one at a later time. Dynamic Pricing systems take Emotional Value of the individual,... at the given time..into account. Its no wonder why so much art is sold at auctions rather than at fixed pricing at PER word or PER Sq Inch. Southeby's, Ebay and the used car salesman all use EV to arrive at a good price.
In the story above, Jesus demonstrates that the two coins that the widow puts in has far greater value than the gold a rich man puts in.
Given below is the plot I liked. Perhaps you'll like it too?
Monday, June 16, 2008
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