ch5

We determine the value of things based on their availability and by comparing them to others.

Contrast Effect Contrast-Effect is the reason why you appear far less attractive than you truly are when standing next to your ultra-attractive friend.

The contrast-effect is also the reason discounts in business are successful. For example, we perceive a product that has been reduced from $100 to $70 to be better value than one that has always cost $70, even though the starting price plays no role in a product’s actual value.

Scarcity Effect we misjudge something’s value occurs when we perceive its scarcity.

This phenomenon has been verified in one test involving cookies. In the experiment, subjects were divided into two groups: in one, each person received an entire box of cookies, and in the other, a mere two cookies.

They then rated the cookies. The subjects that had received only two rated them much more highly than the other group.

Businesses also take advantage of this lapse in our judgment by creating the feeling of scarcity, using phrases such as “today only” or “only while supplies last” in order to drive sales.