This is a question I am regularly asked in regard to appraisal language. Price is frequently confused with value (and abused; especially in the hype-rich arena of retail jewelry, where one is often used to justify the other). While price and value are nearly always used in close proximity, they are really two different things. I follow with terms, and three examples.
Price is the amount of money expected, required of given in payment of something; it is clear and uncomplicated. Price is set by a merchant, according to the market conditions in which he operates, and/or according to his economic needs at time of sale. Price begins as the "suggested" dollar amount the merchant wants (hopes) to be paid for his merchandise. Price can be negotiated, but ultimately becomes established with a transaction between the parties.
Value, however, is said to be a social agreement; an evaluative consensus among parties interested in a property, of what is a reasonable price for that property. Stated another way, value is the perceived worth of something; the importance or regard it is attributed; its material worth (sometimes regardless of the price asked, or paid for it). Value can have many faces, and many interpretations depending on market characteristics, circumstances and limitations; and since it is perceived, it can be reinterpreted. The price of an item may be the same, more or less than its value. I submit that value is most often the greater force (in trade or in use) that drives price, rather than the converse.
Example 1: Jeweler, Jim Stone, offers you a diamond bracelet at a certain figure. You reject the offer, but counter with a different figure, which Jim accepts. The price of the bracelet is thereby established without regard for its value.
Example 2: Your friend, who works at Golden Associates (antique dealers and estate brokers), calls to tell you about a new estate they are handling, in which, are several vintage sterling silver compacts (she knows you collect them; in fact, you have purchased several from her). The sale, by way of informal auction, will be Tuesday. You arrive early to preview the offerings. The compacts are priced within the range you expected; $450 to $700. Your attention however is drawn to one compact. You have seen a few others before like this one, but had not the opportunity to acquire. It is priced like the others, but quite different from anything you have; and you want it!
Later at the auction: when this piece comes up, you find yourself in a bidding competition with someone across the room. You and your opponent counter bids all the way to $850 (which is $200 more than your trading experience tells you it is worth). Somehow, you shout, $950!" Congratulations. In this case, the price was more than the market value. Again, price was established witout regard to value. The difference perhaps, is that the value to you was worth the price you paid. Interesting.
Example 3: Turbo-Time, an up-scale "watch-a-rama" in the shopping village, sells the well advertised, ridiculously popular "Codex" watch brand. The list price of the steel and gold model is $6500. But Turbo-Time, like nearly every other Codex dealer in the country, routinely offers 20% off list (-$1300), selling it for $5200. Turbo-Time also issues with every sale, an "Insurance Appraisal" stating the replacement price to be $6500. Bear in mind: as the discount structure is well known, there is little reason to believe people will line up to pay full list; and the most common market transaction history indicates $5200. In this case, value follows price; the real value of this watch becomes $5200.
Something for next time. Say you purchased a piece of jewelry, in the traditional retail market, for $10,000. The jeweler gave you a piece of paper for your insurance carrier listing the replacement value as $20,000. Do you have that item scheduled for $10K or $20K?
Quenton
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