Limited Edition
This article is a part of a series, ‘Rethinking Our Thinking’, that explores daily-life nudges and how to out-smart them.
By Akalya Srikumar (UG 22), Edited by Aarushi Kataria (UG 22)
I got a seat in one of the most sought-after co-curricular programs my university offers. When I received my confirmation, I had already met my semester requirements and my co-curricular requirements comfortably. In fact, by taking up this course I was well on my way to discovering the basement of mid-sem rock bottom. Despite my better judgment, I could not bring myself to give up the class. Sure, it was an incredible course taught by a suave professor known for her wry humor. But that by itself does not explain my reluctance to part with the course. This was peculiar, and I was wondering just like you are now about the underlying reasons. Finally, behavioral science solved this puzzle.
As I had mentioned, the content and the instructor were appealing but it was instead the long waiting list that seduced me. I had landed one of the most coveted courses: High in demand and low in availability. We have a simple enough name for it: scarcity. Or in other words, I did not want to lose something that everyone else seemed to want.
An extremely sophisticated auto-pilot setting, the rarer the better, like every other setting is deceptively simple in meaning but immensely tricky in use. By correctly identifying that rare items are precious we have in the past identified medicinal herbs and beautiful pearls. But when tapped into with the wrong intentions you can easily see its fallibility. Unfortunately for us, the ease with which we can identify the potential misfires of the scarcity principle while not being faced with it does not come in handy when we face, well, face it. I understand that it is not fair. But then you and I were not consulted when the laws of the universe were being devised.
A very close cousin of scarcity is the mischievous loss aversion: the value of something increases when there is a risk of it being lost. So, by simply creating an illusion of loss, it forces you to abandon rational thinking. I remember all those times when a book that would have otherwise been gathering dust in the attic suddenly finds a place for itself in the most-used section of my library. Why? Because my mum would have reminded me of her law: Either I use it, or she loses it. Once again, I was not consulted when she devised this law, so I have to do the next best thing, pretend to use it. One thing I know for certain is that she neither has the time nor energy left to sort through my library, but the mere potential of loss is enough for me to do something about it.
Ultimatums innately bring a sense of time scarcity and thus it is the most widely used application of scarcity as well. The labels ‘limited edition/stocks’ or ‘Hurry, last piece’ are some of the common encounters. Telemarketers are notorious for ruthlessly exploiting the scarcity bias by making you believe that the end of the phone call is the deadline for the offer. We know that’s not true. No company would refuse a customer who is interested in a purchase yet the sense of urgency tricks us into making a rash decision. Who can forget Neal Caffery swindling a poor man of his savings pretending to be an investment banker straight out of the wall-street trading floor? By the way, it was based on a real incident. He is sure to create the impression that the end of the phone call is the last his unsuspecting listener is going to hear about this magnificent offer. In hindsight, the ruse is elementary; however, when confronted by scarcity it looks like our brain simply throws its hands up in the air, switching into auto-pilot.
Ironically for a real-life pilot, his brain switching into auto-pilot had disastrous consequences for himself and 582 others. The veteran pilot commenced take-off without getting authorization from the ATC and crashed into another plane on the run-away. As shocking as this may sound, analysts have identified a host of time pressures like the limits on maximum flying hours and the harsh punishments that follow for the ones who broke it. Oh, did I mention, the weather was getting worse and in hours the remote airport would be rendered unusable. The scarcity of time culminated in him making one of the most tragic decisions of airline history. Why did an experienced pilot succumb to scarcity? Researchers Mullainathan and Anuj Shah suggest that people facing scarcity have poor cognitive bandwidth, ergo make bad decisions. They created a family-feud-like game and randomly assigned Princeton university students into being time-rich (50 seconds) or time-poor (15 seconds) to answer a set of questions. Half the participants were given the option to borrow time but every additional second borrowed cost the team 2 seconds from their total time pot. The findings showed that the time-rich students were more judicious in their time than their time-poor counterparts. The ones who were poor were making themselves poorer through poor resource-based decisions. This is extremely counter-intuitive and that is exactly the effect scarcity has on us. Unlike other tactics, it does not merely cajole us into a false sense of security but blinds us to the implication of the decision. It compromises our cognitive capacity to think.
Such drastic consequences pose the all-important question: Why do we still use scarcity despite knowing its vices? That’s the obvious part; it is a shortcut that we have developed over the centuries to help us make efficient decisions.
In marketing, scarcity translates into hype. No company produces hype as well as the American street-fashion brand Supreme. It has grown into a billion-dollar with zero paid advertisements. Yes, you read that right. Supreme launches its collection one product at a time and in limited quantities. It sustains the traction it gains by creating tremendous hype on social media using influencers known as the hype beasts. While these hype beasts create excess and crazy demand, the company produces fewer quantities of products creating short supply. Viola, we have scarcity all over our social media feed. If you are still unable to appreciate the elegance of scarcity, then here you go.
StockX, a self-proclaimed stock-market of things, states that when limited period items are offered, the price that the company sets has no market relevance. It is the difference between the highest and the lowest bid on platforms like theirs that determine the product’s market price. Kyle Maiorano made revenue of 200,000 dollars in the last Adidas drop by buying the shoes in advance and selling them on the secondary markets at much higher prices. Scarcity has created a whole bustling industry; such is its power. So, how do we protect ourselves from it? We have seen that scarcity hijacks our brains and forces us into tunneling. We lose sight of the several crucial data that we otherwise would have paid attention to.
To tackle the problem, we must first recognize it. Why does scarcity have such a crippling impact on our minds? This is essential because we do not realize our biases at the moment. We convince ourselves that we like a product because of its merit because that’s what prudence dictates and we are prudent people, or so we think. But if there is something that I would like to emphasize throughout the series is that our intellectual bandwidth is extremely limited and that we do not make the most prudent choices all the time. We make the easy choices; choices that are made using heuristics. From the examples, we can infer that we desire products that are not only short in supply but more in demand. So, the next time you decide to buy a product that you were conflicted about after seeing a pop-up that says, ‘2 articles remaining’, you know why.
The simple way to maneuver the scarcity monster is to understand our reaction and then respond to it wisely. As we had noted earlier in the Princeton study, scarcity has a way of triggering an impulsive and emotional response from us. It cripples our foresight. So, when you feel the emotion sweep all over you to grab and own that scarf, use the very same physiological response to switch on the ‘seat-belt’ sign. Pause and question the motive of your purchase. In other words, ask yourself whether you want to buy a product so that you can be the proud owner of such a rare and valuable product, or do you want the product to be of some use to you. If it’s the former, then scarcity will help you determine its worth. However, if it is the functionality you are after, then all you have to remember is that scarce commodities do not function better.
It seems like a simple solution to an extremely complex problem, but we must realize the complexity of the problem increases only when we fail to understand its simple mechanics. Now that you understand the workings of scarcity, flash your best evil smirk at the next pop-up that reads ‘limited offer’ and ignore it.
References
https://thedecisionlab.com/reference-guide/anthropology/scarcity/
https://www.apa.org/monitor/2014/02/scarcity
https://hq.quikly.com/blog/scarcity-marketing-supreme-oreos
https://www.mashed.com/209839/sneaky-ways-walmart-gets-you-to-spend-more-money/
Akalya Srikumar is a third-year undergraduate psychology major who likes to explore the subtleties of human behaviour.
