Raising prices can make sense when many people are competing for an item, notes Undercover Economist Tim Harford. He explains that when competition gets sufficiently intense due to scarcity, “winning” takes more effort or resources – effectively increasing the item’s cost. This is called “rent dissipation”.
Just a feeling?
Six studies suggest people may rely more on emotion to make decisions if uncertain. In one study, researchers found that people said they’d pay more for a TV, for example, after being asked – or “primed” – to recall a time of uncertainty, such as waiting for exam results.
Adds life to sales
People may buy more fizzy drinks if they’re offered in smaller cans , as the Washington Post explains. Extra packaging allows firms to charge more for less soda – but also people may typically feel they’re making a healthier choice, or even that the small cans mean they need to buy more.