Monday, August 22, 2005

the price of mango

I never understand how ‘price’ is defined, even though my husband always has an explanation of every price phenomenon I encounter. My opinion is that price does not always reflect the value of the good or service I consume. Here is the story of a mango price.

Two weeks ago, I was grocery shopping at at a well-known “mid-and-above-class” when I saw mangoes displayed in the fruit section. I immediately bought it, because I love mango and it’d been a while I had not have mango. The price was IDR 1950/gram and the price board said “mangga harum-manis spesial” (special sweet-and-smell-good mango). Taking for granted the IDR/gram denomination, I took two, one for me and another for my husband. I was a bit shocked by the resulting price I should pay. It was IDR 18500 for two mangoes, or around IDR 9000 each (equivalent of three can of cokes!). I was tempted to put the mangoes back, but, hey “I want mangoes! I should buy mangoes”. I justified myself: “The board says these mangoes are ’special’”. There I went. I assumed “price comes with quality” – as my husband always says. Finally, the mangoes were in my fridge. The next day, I eagerly peeled one mango and tried it. It was … sour, a bit hard and not special! I felt deceived. I was disappointed: “price does not come with quality at all”.

Since I was still craving for delicious mangoes (no, I’m not pregnant, by the way), my husband suggested me to “buy it from who specializes in it” – this is another mantra of his economics. He supposed that special fruit store with lots of customers should imply higher quality. So we dropped by at a famous and crowded fruit store – that sells nothing but fruit (my husband even insisted to look for a store that sells nothing but mangoes. No such store here). I picked “export quality” harum-manis mangoes priced at IDR 1650/gram. Though it was slightly cheaper than the previous one, it still cost IDR 8000 each (again , I bought two). As soon as I got home, I took the knife and sliced one. Well, the taste was a slightly better than the first one, but still it was far from delicious. It was very different from what I expected the term “special quality” should be: sweet, nice smelled, and a bit (for lack of better term, but you know what I mean) crunchy.

But today, I was very happy. I took the risk to buy two mangos from a hypermart that cost only IDR 6300, or around IDR 3000 each. Surprisingly it tasted… very yummy. Sweet, nice smelled and slightly crunchy, just what I expected! Admittedly, when I decided to buy it, I did not expect that it would deliver such a “special quality”, given the price. This is the graph that I draw for this phenomenon (see graph). I will to pay more for higher quality, but what I get sometime does not have the quality that it should deliver. So, why should I pay more if I can not get the quality I demand? When I confronted this fact with my husband, he said, “well, it was simply a market distortion”. He – annoyingly -- still believes that price comes with quality and good quality is always more expensive. The price has been distorted by “the inability of the producers or sellers to maintain the quality, yet they took advantage from asymmetric information – consumers have no idea” . He’d better have better explanation. For me, this kind of ability and information should be embedded in the quality and that is why I am willing to pay premium price.

In conclusion, next time if I want mango, I will go to hypermart…