Before the question of a journalist, the winner of the Nobel Prize in Economics in 2017, Richard Thaler, assured: “I will spend the Nobel money in the most irrational way possible”. This distinguished professor of Economics and Behavioral Sciences at the Booth School of Business, University of Chicago (USA), has been recognized by the Swedish Academy for his research on how emotional and non-rational aspects influence the making economic and financial decisions.
His studies are framed at the intersection of two fields: economics and psychology. Behavioral or behavioral economics tries to understand how the human being makes decisions as an economic agent, based on the fact that it does not always do so optimally or rationally, explains Penelope Hernandez, professor and director of the Laboratory of Experimental Economics and of Behavior (LINEEX), at the University of Valencia. “People act quickly and instinctively, without thinking too much, as we are animals of customs,” he says.
As a result, our brain often uses shortcuts to act fast and save us effort, Hernandez says. “Can we imagine a man from prehistory calculating the angle and power to throw a stone? Do we read all the cookie notices that we accept? Or we compare the prices of the model of car that we are going to buy in concessionaires of all the country?” Raises the expert. Of course, they are rhetorical questions.
Knowing what happens in the consumer’s mind when making those purchasing decisions is one of the goals of behavioral or psychological economics. And, of course, the results of research in this regard serve marketing managers and vendors of companies to get people to buy at different prices than they would initially. They are based on our cognitive biases, which cause us to have prejudiced or distorted perceptions.
How we fall into the trap
In his book The Traps of Desire. How to control the irrational impulses that lead us to error (Ariel, 2008), Dan Ariely describes one of his studies in this regard, which proves the decoy effect with his students at the Massachusetts Institute of Technology (MIT). In his experiment, this Professor of Behavioral Economics proposed a hundred volunteers two different offers to subscribe to the publication The Economist. One, cheaper, was for the online version and cost about 50 Euros. The other was worth more than double-about 106 Euros-and gave access to both print and digital editions. The result: 68% preferred the first and 32%, the second. However, these figures were drastically reversed by introducing a third option: a subscription only for the printed version that cost the same as the one that also included the digital edition, 106 Euros. With this new variable, only 16% subscribed to the internet offer, compared to 84% that chose the one that included both editions -printed and digital-.
The strategy is clear: the two-for-one effect and adding a high-cost option makes intermediate options seem more attractive. And it worked. “If you think about it, the third variable seems absurd. Nobody would pay a figure just for the print edition if for the same amount you can have both. However, it is not, because it changes your perception of the second offer, “says Mario Tascón, founding partner and director of Prodigioso Volcán, a communications and digital transformation consultancy. Come on, that seems like a bargain.
This science is, in reality, a formalization or codification of buying attitudes that merchants have tacitly used for thousands of years. For example, the shopkeepers of the market have usually resorted to the scarcity effect or to the offer in specific days – as it happens today, for example, with the Black Friday -. With the claim that they are running out of stock or that their offers have an expiration date, they encourage buying as soon as possible.