the psychology of price

I started out as a mathematician. In 1994 I took a short break to start a software company, and didn't come back for a while.

One of the first challenges I confronted was pricing. A new market was appearing and there were no clear precedents for the price I should charge. Yet I couldn't find any useful advice out there.

Across long years of doing business with hundreds of clients, I experimented with many different pricing methods. Gradually I started to learn what worked and what didn't, I explored different industries and I established new kinds of relationships in different sales channels.

Economics did not seem to have any good answers; it was impractical to use its methods in a small business. The typical practice of my peers in other businesses was to copy someone else's price and change it a bit. I tried applying mathematics to the problem, which helped a bit. I studied some psychology. Finally I discovered the emerging field of behavioural economics.

This field, which combines psychology and economics, studies the value that people put on things, the money they pay and what influences them. It unlocked most of the answers that I was looking for, and gave me the tools to find the rest.

I now split my time between academic behavioural economics research, writing a blog at http://www.pricingrevolution.com/ and advising clients around the world on their pricing strategy. I'm CEO of pricing software company Inon and a partner at the behavioural economics based market research firm Irrational Agency.

My current research aims to build a coherent mathematical foundation for behavioural economics which will allow it to be applied to macroeconomic policy as well as individual companies and markets.