Are first impressions really everything?
So I have been finishing up this excellent book on behavioural economics called 'Predictably Irrational' and I highly recommend it if you haven't read it yet as I believe it to have excellent application to investors!
One of the intriguing ideas it presented is called "Arbitrary Coherence" and it states that once an initial price is set in our mind it shapes the prices we're willing to pay for not just that particular product BUT also similar products.
With that in mind I am wondering, have any of you have had any real experiences with this type of behavior in your own investing careers? For example if you are invested in more than one market, think back to the first market that you did your first real estate deal. Looking at it as objectively as possible, do you find that your first deal has shaped or set an anchor point on what it is you are willing to pay for properties in other markets? Or if you have paid a contractor to do a job in one situation has that set a maximum amount you would be willing to pay for that type of work?
I'm interested in hearing if you believe this to be true and what experiences you may have had with this idea.