Shane Frederick, an associate professor of marketing at the Yale School of Management, ran a series of experiments to discover how good people were at estimating what others might pay for various consumer goods including teddy bears, artwork, smoked salmon and books.
Thirty-five students at the Massachusetts Institute of Technology (MIT) bid on 10 products and estimated what the median bid would be. On average, they overestimated the median bid by 43%, according to the study.
People’s overestimation of what others will pay even applied to imaginary goods, such as a magic pill that allows one to speak French.
The estimates were better for non-monetary payments, or manual labor, such as the number of pencils a person would sharpen in order to obtain the good.