I think this is less common than you would assume. Yes, there is a 'poor tax' on low quality items that are more expensive in the long run, but also people have gotten burned enough times paying more for an item that still turned out to be crap, so it's hard to justify taking the risk on such an investment.

I think this is true as well. Paying more does not mean higher quality. There are a few brands which seem to release quality products consistently (Apple etc) that paying more is justified but for many others it is just not worth it.

> Paying more does not mean higher quality.

Exactly! It is actually hard to estimate the quality of a product. And when you can't, most of the time you go for the cheaper one (unless money doesn't matter much for you).

Or you use brand as a proxy for quality and buy the Apple one without actually knowing why or how it’s “better”

In which case you obviously care about quality. That's all I'm saying: people do care about quality.

Getting the cheapest product always means worse quality. The biggest jump in cost/benefit is between the cheapest product and the second cheapest. So if you only care about price, you should always get the second cheapest product, which will almost guarantee at least 50% better quality than the cheapest. After that, the ratio is diminishing.

> Getting the cheapest product always means worse quality.

Not true. New entrants to markets often will price to undercut markets (see Uber and Airbnb in their early days). Also loss leaders are a very much a thing.

Over time markets do typically stabilize and this could be true.

The cheapest accommodation will usually not be listed on AirBnB or Booking, because of severe short-comings meaning the platform won't do business with them for any price.

As for Uber, I guess you're right in many regions. But there's a plethora of Uber competitors around the world, offering a worse experience for a cheaper price.

In 100% of cases, the cheapest product you can find will be of significantly worse quality than the second cheapest product, without bringing much savings. The rest is edge cases.

As you pointed out, I'm talking about reasonably mature markets.

In my country, studies regularly show that the cheapest toothpaste or shampoo (and other similar products) are some of the best. I would consider that mature.

I think it's an interesting heuristic, though.

> Most of the population is limited by cash flow so that extra 20% they get to spend on food today is worth more than the quality of the phone a year from now.

Most of the population in the US has an iPhone. If you were right, they would most definitely have a cheaper phone.

Because they are on contract. Your point does not refute the earlier, it is a cashflow issue. Most people buy phones on contract and pay X per month over Y months rather than paying X*Y total upfront.

And getting an iPhone on contract is cheaper than getting a cheaper Android on contract?

They are around the same price. Given that, most people opt to use an iPhone, for reasons more cultural than quality wise (blue vs green bubble, network effects, apps they want to use, etc), given that high end Androids have similar quality levels.

So when I ask if the iPhone are more expensive than Android, your answer is "given that they go for iPhone or high end Androids, they are the same price"? It means that some contracts are cheaper, for cheaper Androids, right?

Not sure I understand.

A significant number of people have enough money that they can decide between options that cost less or more. Otherwise we wouldn't have $2000 phones or TVs that range from $500-100.000. If the number of people with sufficient budget to choose between options was so small that we can ignore it in this discussion, no manufacturer would bother with market segmentation.

However, they do bother, so it's wrong to just assume baseline that most people just care about the cheapest option because that's all they can afford and that we shouldn't bother.

Many of us strive to get the best possible deal within a budget which satisfies our preferences and delivers a certain amount of quality. The fact that most of us don't have an unlimited budget makes it all the more important to us and this discussion that manufacturers can skimp on quality in a way that's unrecognisable to 99% of the market until a certain amount of time has passed. This has other consequences than just "it's cheaper but it's shitter and we don't know how much shittier". It allows utter bullshit like "I bought this $200 Xbox controller and the bumper broke after 3 months and I got it replaced twice and now the replacement is broken again after another 2 months". And all we can do is shrug because that's just what modern manufacturing is like. Skimping on everything while setting a price point as high as they can get away with using marketing.

On average, the people I know to have expensive phones and very big TVs are a lot poorer than the people with cheaper phones. The former eat domino's pizzas. There's a lot more psychological effect at play than just price and amount of food in the table.

Back in the 1990s when researchers went to write about millionaires they discovered most people who look rich are in debt such that they have less to live on day to day than poor people - they have nicer houses and toys but for their day to day budget they are in trouble. When they found people who had a high net worth they were living in poor neighborhoods and otherwise looked poor - but their bank account was big. Then they wrote "The millionaire next door".

After looking at life I've concluded both are wrong ways to live. you should save 10% for retirement (that is a good number for discussion but I'm open to other numbers). Spend the rest on toys - but don't go into debt. You can't take it with you, and do not know for sure that you will be healthy enough to do whatever activity you are saving up for in retirement. (at 50 my body is already such that I don't think any amount of training could get me ready to climb Mt Everest - good thing that was never my dream because it is too late. I could have done that at 30 if I wanted and there are plenty of less extreme things I can still do)

Lots of the population isn't paying up-front for their phone, and the monthly fee on a longer lasting phone would be lower in a competitive market.