Scarcity in Economics

Scarcity

That opportunity seems more valuable to us when the availability is limited.

The idea of potential loss plays a large role in human decision-making. In fact, people seem to be more motivated by the thought of losing something, then by the thought of gaining something of equal value. For instance, homeowners told how much money they could lose from inadequate homeowners insurance, are more likely to increase their policy, then be told how much money they could save.

Brochures urging women to check for breast cancer through self – examination are significantly more successful if the state their case in terms of what stands to be lost. (e.g., “you can lose several potential health benefits by failing to spend only 5 min. each month during breast self – examination”) rather than gained (e.g., “You can gain several potential health benefits by spending only five minutes each month during breast self – examination”)

Collectors of everything from baseball cards to antiques are keenly aware of the influence of the scarcity principle in determining the worth of an item. As a rule, if it is rare or becoming rare, it is more valueble.

Probably the most straightforward use of the scarcity principle occurs in the “limited –number” tactic, when the customer is informed that a certain product is in short supply that cannot be guaranteed to last long.

“Exclusive, limited engagement ends soon!”

It is to “keep the prospect from taking the time to think the deal over by scaring them into believing they can’t have it later, which makes them want it now.”

So when increasing scarcity-or anything else – interferes with our prior access to some item, we will react against the interference by wanting and trying to possess the item more than before.

When our freedom to have something is limited, the action becomes less available, and we experience an increased desire for it. However, we rarely recognize that psychological reactance has caused those to want the item more; all we know is that we want it. Still, we need to make sense of our desire for the item, so we begin to assign it positive qualities to justify the desire. After all, it is natural to suppose that if one feels drawn to something, it is because of the merits of the thing.

The intriguing thing about the effects of censoring information is not that audience members want to have the information more than they did before; that seems natural. Rather, it is that they come to believe in the information more, even though they haven’t received it.

Limiting access has the same effect as did banning or censoring something. People want the restricted item more and, as a result, become more favorable towards it.

The realization that we value limited information allows us to apply the scarcity principle to realms beyond material commodities. The principle works for messages, communications, and knowledge, too. Taking this perspective, we can see that information and may not have to be censored for us to value it more; it need only be scarce. According to the scarcity principle, then, we will find a piece of information more persuasive if we think we can’t get it elsewhere.

An important practical problem, then, is to find out when scarcity works best on us.

Do we value more those items that have recently become less available to us, or those things that have always been scarce? The drop from abundance to scarcity produced a decidedly more positive reaction than did constant scarcity.

The idea that newly experience scarcity is the more powerful kind applies to situations well beyond the bounds of study. When the economic and social improvements they have experienced and come to expect suddenly become less available, they desire them more than ever, and often rise up violently to secure them.

Studies show that those things that becomes scarce through the process of social demand like the items significantly more than those whose items had became scarce by mistake. In fact, items made less available through social demand were rated the most desirable of any in the study.

This finding highlights the importance of competition in the pursuit of limited resources. Not only do we want the same item more when it is scarce, we want it most when we are in competition for it. Advertisers often try to exploit this tendency in us. In their ads, we learned that “popular demand” for an item is so great that we must “hurry to buy,” or we see a crowd pressing again the doors of a store before the start of a sale, or we watch a flock of hands quickly deplete a supermarket shelf of a product. There is more to such images than the idea of ordinary social proof. The message is not just that the product is good because other people think so, but also that we are in direct competition with those people for it.

The feeling of being in competition for scarce resources has powerful motivating properties.

Salespeople are taught to play the same game with indecisive customers.

There is something almost physical about the desire to have a contested item. Shoppers at big close – out or bargain sales report being caught up emotionally in the event. Charge by the crush of competition, they swarm and struggle to claim merchandise they would otherwise disdain.

For similar reasons, department stores holding a bargain sale toss out a few especially good deals on promotional advertised items called loss leaders. If the bait, of either form, has done its job, a large and eager crowd forms to snap it up.

If, because the brain – clouding arousal, we can’t rely on our knowledge about the scarcity principle to stimulate properly cautious behavior, what can we use? Perhaps, in fine jujitsu style, we can use their arousal itself is our prime cue. In this way we can turn the enemies strength to our advantage. Rather than depend on a considered, cognitive analysis of the entire situation, we might simply tune ourselves to the internal, visceral sweep for our warning. By learning to flag the experience of heightened arousal in a compliance situation, we can alert ourselves to the possibility of scarcity tactics there and to the need for caution.

Suppose we accomplish this trick as using the rising tide of arousal as a signal to calm ourselves and to proceed with caution. What then? Is there any other piece of information we can use to help make a proper decision in the face of scarcity? After all, merely recognizing that we ought to move carefully doesn’t tell us the direction in which to move; it only provides the necessary context for a thoughtful decision.

Fortunately, there is information available on which we can base thoughtful decisions about scarce items. So despite the increased yearning that scarcity caused (the raters said they wanted to have more of the scarce item in the future and would pay a greater price for them.) Therein lie’s an important insight. The joy is not in experiencing a scarce commodity but in possessing it. It is important that we do not confuse the two.

It’s also important we understand the scarcity pressures in a fulfillment situation, then, our best reaction will occur in a two – stage sequence. As soon as we feel the pressure of emotional arousal that flows from the scarcity influences  we should use that arousal sensation as a signal to stop and think. Anxious, feverish reactions have no place in wise conformity decisions. We need to calm ourselves down and regain a rational perception. Only until then can we move to the second part and that is to ask ourselves, “Why we want the item?”If the answer is, we want the item mainly for the purpose of owning it, then we should use its availability to help gauge how much we want to spend on the item. However, if the answer is “We want it primarily for its function” (that is, we want something good to drive, drink, eat, etc.), Then we must remember that the item under consideration will function equally well whether scarce or abundant.

Very often in making a decision about someone or something, we don’t use all the pertinent information that is available to us; we use, instead, only one single piece of the total. And an isolated piece of information at that, even though normal advice seems correct, it can lead us clearly to a stupid error. A mistakes that, when explained by others not attached to the decision process, make us feeling embarrassed and feeling stupid.

There are many reliable prompts, those that normally point us towards the correct choice. That is why we utilize the factors of reciprocation, consistency, social proof, liking, authority, and scarcity so often and so automatically in making our logical decisions. Each, by itself, provides a highly reliable clue as to when we will be better off saying yes rather than saying no.

When we are rushed, stress, uncertain, indifferent, distracted, or fatigue, we tend to focus on less of the information available to us. When making decisions under these circumstances, we often revert to the rather primitive but necessary single piece of good evidence approach. All this leads to a jarring insight: with its sophisticated mental apparatus we have used to build world eminence as a species, we have created an environment so complex, fast – paced, and information – laden that we must increasingly deal with it in the fashion of the animals we long ago transcended.

When we are rushed, stress, uncertain, indifferent, distracted, or fatigue, we tend to focus on less of the information available to us. When making decisions under these circumstances, we often revert to the rather primitive but necessary single piece of good evidence approach. All this leads to a jarring insight: with its sophisticated mental apparatus we have used to build world eminence as a species, we have created an environment so complex, fast – paced, and information – laden that we must increasingly deal with it in the fashion of the animals we long ago transcended.

 

 

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