Economic Indifference and True Grit
Early on in the film True Grit, fourteen-year-old Mattie Ross is trying to sell back some horses that her father bought right before his death. I recommend you watch the whole negotiation–it’s incredibly funny–but there was one line that stuck with me.
Her interlocutor makes an offer and follows up by saying “you must take that or leave it, and I don’t much care which it is”. The Coen brothers are economically savvy! Your true valuation of something is exactly the price at which you are indifferent between the money and the object. Of course, we know (and the Coens go on to show in the scene) that people don’t have “true valuations”, but come up with numbers as the situation demands. So make sure to determine your “indifference price” before the negotiation, then use it as a bound on what you will accept.
However I’m not sure this is actually a life-useful heuristic. It’s hard to say when you are indifferent between two things, because the way you compare is by thinking about the features of each option. Since each feature is emotionally salient, and the mind doesn’t “add up emotion” in a rigorous way, I think we’re rarely as indifferent as we should be.
In particular, the felt experience of a fair price is usually not indifference: it can be anxiety or vacillation.