In pricing strategy, how to determine the boundaries of 'cost + value + psychology' using first principles?

Good question, let's talk about this. Don't overcomplicate it; first principles thinking means you act like a "devil's advocate" who knows nothing, digging into every question until you find the most fundamental, unshakeable point. Let's break down pricing.

1. Cost: Your "Survival Baseline"

This is the simplest boundary, and the hardest. Ask yourself using first principles:

"What are the absolute minimum expenses I must incur to get this product (or service) into the customer's hands, not a penny less?"

Don't look at competitors' pricing, and don't take anything for granted. Just grab a pen and paper, or open a spreadsheet, and relentlessly tackle this question.

If it's a physical product (like a cup of coffee): The cost of beans, water, electricity, cup and lid, the portion of store rent allocated to this cup, the barista's salary allocated to this cup... Add up all these non-negotiable, essential expenses.
If it's software/service (like an app membership): The cost of servers, bandwidth, the portion of developer salaries allocated to this feature, customer service, marketing for this feature...

The sum you calculate is your cost boundary. This is your survival baseline. If your pricing consistently falls below this boundary, you're running a charity; the more you sell, the more you lose. This is a law of physics, non-negotiable.

2. Value: The Customer's "Psychological Ceiling"

This is the hardest to grasp, but it's also central to determining your profit margin. Ask yourself using first principles:

"What fundamental problem is the customer truly trying to solve by buying my product? How much is the solution to this problem worth to them?"

Note, the protagonist here is the customer, not you. You need to completely forget your costs and get inside the customer's head.

They're not buying a "drill bit," but a "hole in the wall." When a user buys your poster template, they're not buying images and text; they're buying "3 hours and 500 yuan saved from designing it themselves or hiring a designer." So, the value your template brings them is roughly "3 hours + 500 yuan."
They're buying a "feeling" or "status." When someone spends tens of thousands on a watch, they're not buying the "function of telling time" (because a phone is more accurate); they're buying a "symbol of taste," an "entry ticket to a social circle," a "reward for their efforts." This value is hard to quantify, but it genuinely exists. You can indirectly estimate the range of this value by observing what else these types of customers spend a lot of money on.

This value boundary is the maximum price a customer is willing to pay for your product. Beyond this point, they'll feel it's "not worth it," they'll feel "it's cheaper to do it myself" or "there's a cheaper alternative." This is determined by the human tendency to "seek gain and avoid harm."

3. Psychology: The Art of Dancing Between "Baseline" and "Ceiling"

Alright, now you have two points: your survival baseline (cost) and the customer's psychological ceiling (value). Your pricing range lies between these two points. So, where exactly should you set the price? This is where "psychology" comes in.

Ask yourself using first principles:

"What are the deep-seated, unchanging decision biases in human nature? How can I leverage these biases to make the customer feel like they've 'gotten a good deal'?"

This isn't about deception; it's about communicating in a way that aligns with human nature.

Anchoring Effect: People often need a reference point to judge whether something is expensive. Why do many software products have an exorbitantly priced "Enterprise Edition"? It's not necessarily meant to be sold, but to "anchor" a high price, making the adjacent 998 yuan "Professional Edition" seem like an incredible bargain. The fundamental principle is: the brain is lazy about absolute calculations and always looks for shortcuts through relative comparisons.
Loss Aversion: The pleasure of "gaining 100 yuan" is far less intense than the pain of "losing 100 yuan." Therefore, "Buy now and save 200 yuan" (helping you avoid a loss) might be more appealing than "Buy now for only 799 yuan."
Integers vs. Non-integers: Why does 99.9 yuan seem much cheaper than 100 yuan? Because our brains read from left to right, subconsciously perceiving it as "ninety-something yuan," not yet "over a hundred." This leverages our brain's "shortcut" for processing numbers.
The Magic of the Middle Option (Compromise Effect): When presented with "small, medium, large" cups, many people subconsciously choose the medium, feeling it's the safest bet. Merchants have long understood this, designing the product they want to promote most, or the one with the highest profit, as the "middle option."

To summarize, in plain language:

Crunch the numbers (Cost): Figure out your survival baseline.
Empathize (Value): Get inside the customer's head and understand the maximum they're willing to pay.
Leverage human nature (Psychology): Between the baseline and the ceiling, find the most comfortable spot, communicate the price in the way the customer finds most acceptable, and let them happily hand over their money.

The role of first principles here is to free you from the habitual thinking of "everyone else prices it this way, so I will too..." and return to the most fundamental logic of "business-human nature."