Sid and Harry ran a clothing store. Sid was in charge of sales and Harry led the tailoring department. Whenever Sid noticed that the customers who stood before the mirror really liked their suits, he became a little hard of hearing. He would call to his brother, ‘Harry, how much for this suit?’ Harry would look up from his cutting table and shout back: ‘For that beautiful cotton suit, $42.’ This was a completely inflated price at that time. Sid would pretend he hadn’t understood: ‘How much?’ Harry would yell again: ‘Forty-two dollars!’ Sid would then turn to his customer and report: ‘He says $22.’ At this point, the customer would have quickly put the money on the table and hastened from the store with the suit before poor Sid noticed his ‘mistake’.
You order leather seats for your new car because compared to the $60,000 price tag on the car, $3,000 seems a pittance. All industries that offer upgrade options exploit this illusion. The contrast effect is at work in other places, too.
We judge something to be beautiful, expensive or large if we have something ugly, cheap or small in front of us.
We have difficulty with absolute judgements.