Do you really need to buy a $7 cup of coffee?

Jimmy Kimmel doesn’t think so, and if you are like most people – and can’t tell the difference anyway – neither do I.

This is actually an important commentary on the ability of consumers to properly form preferences over products. If a consumer cannot correctly distinguish between two goods, or is otherwise convinced (through advertising or outright lying) that two identical goods are different, then consumer preferences may be much less stable than economists theoretically think they are.

Behavioral economists frequently consider the impact of framing effects, which sometimes induce preference reversals (wherein consumers prefer x to y then, when asked differently, prefer y to x) and phenomena like the decoy effect (wherein different good-to-good comparisons, often influenced by advertising, lead directly to changes in preferences). Understanding these influences can help shape our model of consumer decision making.

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