Originally posted by Starlight
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As Mark Perry, a professor of economics and finance at the University of Michigan, once explained:
What would you conclude about the quality of product or service X under the following circumstances?
1. The employees of Airline X and their families are offered free airline tickets as an employee benefit. The employees refuse to travel with their families on Airline X and instead pay full fare on Airline Y when flying.
2. The employees of Automaker X are offered a company car at a substantial discount and they instead buy a car at full price from Automaker Y.
3. Employees at Health Clinic X and their families are offered medical care at no additional cost as a benefit and yet most employees of Clinic X pay out-of-pocket for medical services at Clinic Y.
In each case, the employees’ willingness to pay full price for a competitor’s product or service and forgo their employer’s product or service at a reduced price (or no cost) makes a strong statement about the low quality of X. What makes the inferior quality of X even more obvious is that the employees at Firm X, since they work in the industry, would have better information about product (service) X and product (service) Y than the average person.
1. The employees of Airline X and their families are offered free airline tickets as an employee benefit. The employees refuse to travel with their families on Airline X and instead pay full fare on Airline Y when flying.
2. The employees of Automaker X are offered a company car at a substantial discount and they instead buy a car at full price from Automaker Y.
3. Employees at Health Clinic X and their families are offered medical care at no additional cost as a benefit and yet most employees of Clinic X pay out-of-pocket for medical services at Clinic Y.
In each case, the employees’ willingness to pay full price for a competitor’s product or service and forgo their employer’s product or service at a reduced price (or no cost) makes a strong statement about the low quality of X. What makes the inferior quality of X even more obvious is that the employees at Firm X, since they work in the industry, would have better information about product (service) X and product (service) Y than the average person.
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