Tuesday, May 27, 2008

Zero Is Special

I just read a fascinating academic paper co-authored by Dan Ariely, author of new book Predicably Irrational, a book I have heard about, but have not yet read.

The paper presents results from a series of experiments into the nature of free pricing. Here is a juicy tidbit from the abstract:

When faced with a choice of selecting one of several available products (or possibly buying nothing), according to standard theoretical perspectives, people will choose the option with the highest cost–benefit difference. However, we propose that decisions about free (zero price) products differ, in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher.

Yes, you read that correctly: people can consider something free as more valuable than something that costs money. The authors describe several interesting experiments using chocolate that appear to well prove their point.

Bottom line, so to speak: I need to get this book and read it as soon as I can! Even if it does cost money... actually here are some free excerpts.

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