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I found a really interesting article in Parade magazine awhile ago that talked about bargains that really aren’t bargains. I thought the ideas were sound and wanted to pass them along. I know I get all excited when I think I am going to save money and sometimes don’t think clearly. I can honestly say I have made all of these classic bargain hunting mistakes. 

Credit Cards - Putting a purchase on a credit card with a zero interest rate may seem like a good idea, but your are less likely to shop frugally when you are using it - or any kind of credit card. MIT researchers Drazen Prelec and Duncan Simester ran an experiment in which two groups of subjects were allowed to bid on tickets to sporting events. One group paid cash within 24 hours, the other with a credit card. The credit card group offered much more for the tickets and more than twice as much for a sold out game. Other studies suggest that people who pay with plastic spend more and tend to forget how much they spent.

Manufactures rebates - Many eletronics are sold with a rebate and those tempting discounts can sometimes sway buyers to particular brands. But studies show that less than half of all rebates are successfully redeeemed. That is no accident, says Prof. Richard McKenzie of hte Univerity of California, Irvine, author of Why Popcorn Costs So Much at Movies. Companies can introduce an obstacle by mainipultating the window in which a rebate can be redeeemed.  Then there’s slippage - customers are mailed checks but never cash them because the checks expire first or people throw them away without realizing what they are. “Rebate checks can be mailed in enevelopes designed to look like junk mail” McKenszie says.

An ebay auction deal -Auctions get people excited and excited people are likely to overpay “Almost half of all auctions contain overbiddding” says Assistant Prof. Ulrike Malmendier of the Unviersity Of California, Berkeley. Over payments are easy to spot, because ebay sellers often offer identical goods for a fixed price. Malmendier and colleague Young Han Lee found that some Ebay winnners could have gotten higher-quality products  from more reputable sellers and paid less by buying at a set amount. To avoid succumbing to auction induced exuberance, they suggest submitting a one time maximum bid equal to the fixed price available elsewhere on EBay. If you are out bid, forget the auction and buy it at the set price.

Mid-range products - Think that mid-range camera or dishwasher or toaster is the perfect compormise between value and luxury? Think again Professor Itamar Simonson of Standford Unviverity revealed the catch in a classic experiment where subjects were asked to choose between an expensive, high end camera and a cheaper model. He found that more subjects went for the high-end camera when they also were presented with a third choice: an even more expensive, feature-laden product, which made the mid range option seem modest by comparison.  “A company  can exploit customers’ preference for the middle item,” Simonson says, “by presenting a more expensive item next to the one it is really trying to sell.”

Free stuff - Prof. Dan Arlely of Duke University,  has discovered that free products trigger an emotional reaction that can cause consumers to lower their guard “Most transactions have an upside and a downside,” he explains. “When something is free, we forget the downside” Some of Arlely’s examples: freee shipping on larger orders from an internet retailer that causes you to buy things you don’t need in order to qualify, or “free” DVDs that come with an overpriced DVD player. Even free entry to a musueum or gallery can cost in time due to longer lines and crowds.

Bargains Deals That Don’t Save Money

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