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Social Norms and the Price of Zero
Author(s) -
Ariely Dan,
Gneezy Uri,
Haruvy Ernan
Publication year - 2018
Publication title -
journal of consumer psychology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.433
H-Index - 110
eISSN - 1532-7663
pISSN - 1057-7408
DOI - 10.1002/jcpy.1018
Subject(s) - zero (linguistics) , economics , microeconomics , product (mathematics) , price mechanism , reservation price , priming (agriculture) , mid price , incomes policy , law of one price , limit price , demand curve , price level , monetary economics , market price , mathematics , linguistics , geometry , germination , biology , philosophy , botany
The standard economic model assumes that demand is weakly decreasing in price. While empirical evidence shows that this is true for most price levels, it might not hold for the price of zero, where social norms are not entirely compatible with the self‐maximizing economic agent. A set of experiments shows that switching from a low price to a price of zero has two effects on behavior: First, in accordance with the economic theory, more people demand the product. Second, whereas in the low price case some individuals demand high quantities of the product, in the zero price case most people take only one unit of the product. As a result, lowering the price to zero may lead to a net decrease in the total amount demanded in the market. We further show that polite priming results in higher demand than ethical priming in both zero price and 1¢ conditions.