http://www.trailfire.com/rowanrook/trails/45862rowanrook/trails60http://www.trailfire.com/rowanrook/marks/155974Economics and Information TechnologyrowanrookWed, 03 Oct 2007 18:39:19 -0700trailfire:markId:155974http://www.trailfire.com/rowanrook/marks/199980some very interesting experiments. If you listen to the audio interview at that link, Ariely discusses an experiment he ran with children at Halloween. He first gave them all three Hershey kisses. Then he held up two Snickers bars -- one tiny one and one large one. He offered to trade them the small one for one kiss and the large one for two kisses. Most kids quickly made the trade for the larger Snickers bar -- which is a perfectly rational move.

He then changed the terms of the experiment. He offered to give kids the small Snickers bar for "free" or the large one for one Hershey kiss. Most kids now took the free small Snickers bar -- even though they are worse off in that case. Having two Hersheys kisses and the big Snickers bar providers more chocolate than three kisses and the small bar -- but the impact of "free" got them even more interested. Ariely ran more similar experiments (economist Tyler Cowen wrote about one recently) and found that again and again people overpay for free.

This is certainly an interesting finding, given all that we talk about the use of free in economics. If anything, this (bizarrely, I'll admit) makes the case even stronger for using free as a part of any business model. It suggests that people value something that's offered for free more than they should. That has enormous implications for the promotional value of "free." If you're using it that way, it actually increases the value relative to other things, despite the myth some people still have that if something is "free" it means it has no value.]]>Economics and Information TechnologyrowanrookThu, 28 Feb 2008 20:26:32 -0800trailfire:markId:199980http://www.trailfire.com/rowanrook/marks/199981Economics and Information TechnologyrowanrookThu, 28 Feb 2008 20:28:56 -0800trailfire:markId:199981http://www.trailfire.com/rowanrook/marks/199982Economics and Information TechnologyrowanrookThu, 28 Feb 2008 20:29:47 -0800trailfire:markId:199982http://www.trailfire.com/rowanrook/marks/199983Economics and Information TechnologyrowanrookThu, 28 Feb 2008 20:30:40 -0800trailfire:markId:199983http://www.trailfire.com/rowanrook/marks/199984Economics and Information TechnologyrowanrookThu, 28 Feb 2008 20:32:06 -0800trailfire:markId:199984