Would you buy a 75-inch, 8K UHD TV from Samsung for five grand? If you’re like me, the answer is a hearty “No.” I don’t have that kind of discretionary income at this point in my life–and even if I did, I’m fairly certain I wouldn’t feel good about such a purchase.
But what if it were five cents?
If your first reaction to that offer is that there must be a catch, you’ve probably got good instincts. But put those aside for the moment–let’s stipulate that you’re offered this bleeding edge television for a nickel, and that you have no intention of re-selling it on the secondary market.
Would you buy it? I know I would. At just 0.001% of its list price, that’s a steal of a deal.
Heck, even for one thousand times that price–that is, fifty bucks–I wouldn’t hesitate for a second.
In fact, I wouldn’t think twice about the purchase until probably $125, and I would certainly decline the offer at $250. In whole-dollar terms, that TV is worth exactly $249 to me, not a dollar more. At $250, no matter the day, it just costs too much.
Now, maybe it’s pedantic, but I’ll die on this hill: if you complain that some good costs too much, buy it, anyway, and then don’t return it, I’ll look you in the eye and say, “Obviously not, or else you wouldn’t have made the purchase. The fact that you did is proof positive that you valued it more than the money that left your pocket.”
In fact, your real complaint is, “I wish I had enjoyed more consumer surplus in my purchase of this item.”
If I bought our example television set for $0.05, my consumer surplus would be $248.95–the difference between what I paid and the absolute limit of what I would ever pay. If I paid $124.50, my consumer surplus would be $124.50. And, of course, were I to pay exactly what the TV was worth to me–$249–I would have zero consumer surplus.
It would cost–and therefore I would willingly pay–exactly what I thought it was worth. That I got the TV without the perk of also enjoying some level of consumer surplus may not be ideal, but in no sense did the TV cost “too much.”
Given that we live in a world of trade-offs, neither you nor I will ever pay “too much” for any good unless we’re forced to part with our money under the threat–explicit or implicit–of violent coercion.