Searching for a better deal

The price of a product is only one component of its overall cost. A “search cost” is the cost of finding the product you want at a competitive price. Search costs comprise of the time and resources it takes to figure out the fair price and true quality of a product.

The time it takes to shop for textbooks online or the cost of purchasing GQ or Vogue to learn what’s in fashion are both search costs. Even though it may be hideously expensive to buy textbooks from the campus bookstore, it still costs a lot more time and uncertainty to purchase them online. To use an example from last week, one could purchase a travel guide to learn about how to avoid overpaying for a taxi ride in a foreign country.

Last week, we also saw the result when marketers push products whose quality or fair price are uncertain. A captive audience for marketing messages means that marketers incur our search costs. Proponents of the practice argue marketing is an efficient medium to tell the world what’s for sale. But it’s only efficient if the consumer is well informed, and that, my friends, is what we need to work on.

Let’s start with money. Despite our country’s economic strength, we students remain severely misinformed about how to manage our finances I won’t berate the overuse of credit cards and debt-financed spending. Rather, we need to spend a lot more time learning about the peculiarities of our financial system and boring topics like Roth IRAs.

I predict the latest headlines about lifetime workers of bankrupt companies being left with nothing will create ripples through our education system. The days when high schoolers play pointless stock market challenges are numbered. Teachers will soon empower students with the knowledge of making sound, financial decisions, not lucky ones. In the meantime, rich or poor, we need to spend more learning how to save more.

The Internet is considered an equalizing playfield that allows consumers to become better informed about purchasing decisions by reducing search costs. Being the first generation that grew up with its harmonious rise, we are an adept group that can exploit its potential. It has drastically decreased the cost of consuming all sorts of information, and we should not take that for granted. There is no excuse for any of us who have all the resources at their disposal to not incur the proper search costs. Whereas an Afghan peasant can be excused for not knowing the effect of his country on the world stage, he’s got mouths to feed.

So in closing The Case of the Mondays, I encourage you to be good Americans and spend, spend, spend. You can find great deals in a snap on the Exilim s500 or that snazzy v360, but spend more time and search costs becoming a better informed American that sees through the fog of marketing. It feels great when you search and find a deal on a product you’re looking for, but it feels even better when you search and find your place in the world.