Scarcity Bias

Scarcity Bias

Time for Reflection

Last Day Left

Few Days Left

Few Items Left

Special Collectibles

Limited Edition

Till Stocks Last

Once in a Lifetime Offer 

If ever, you have been tricked into buying as a result of any of the above ? If yes, then it's all because you wanted to be among the exclusive lot and not miss this great deal of being the proud owner of an "exclusive" item. This is what "Scarcity Bias" does to us ! 

Definition

"Scarcity Bias" refers to our tendency to place a higher value on objects that are scarce, and a lower value on those that are abundant. We, sort of, unconsciously assume things that are scarce as valuable and things that are abundant are not (valuable). We start associating the availability of a product with its quality.

Scarcity associated with a product or promotional offering enhances its desirability and perceived value (Brock, 1968), creating a sense of urgency (Byun & Sternquist, 2008), framing the transaction in the “loss” term (i.e., “If I don’t buy now, I will lose the opportunity”), and thus biasing decision making (Inman, Peter, & Raghubir, 1997).

Stephen Worchel, a researcher, conducted an experiment with 200 students to rate the quality of cookies of identical types. One set of students picked from a jar of 10 cookies and the other from a jar with only 2 cookies. It was found that the students preferred the more "rare" cookies and were willing to pay 11% more for them.  

More About Scarcity Bias

Whenever a person decides to purchase a "scarce" product, brain regions related to emotion gets more active and when a person decides not to purchase a "scarce" product, brain regions involved in controlled processing gets more active. The decision to purchase an item is due to the "buy it now" mentality created through a reduced activity in the brain region involved with controlled processing.This creates a sense of urgency which impacts the purchaser's cognitive ability to do a proper cost-benefit analysis, instead focusing the cognitive resources on the (symbolic) value of the product. The "emotional high" / "ego boost" that this bias gives us leads us towards this bias.  

The bias is used to great extent in marketing and advertising to lure the potential customers/ consumers and create a "buy it now" tendency in them. Those limited edition products, those few rooms left in a hotel, those few seats left in an airline are all application of Scarcity Bias in real-life.

hotels, airlines, 

Talking about the impact of  Scarcity Bias, it leads us to 

• overvalue a thing
• easily get influenced and manipulated into buying
• not pay any attention to the quality aspect
• excessive spending  
• irrational buying where the purchase is not aligned with our needs most of the times
• live a cluttered life where we tend to hoard things
• compulsive buying which may be detrimental to our mental health
• living a more materialistic life

Few ways we could mitigate the risk of Scarcity Bias are

• Do a reality check and recognise the need for the item in our life
• Identify how does buying/ possessing this thing align with my long-term goal
• Track the usage of the item to identify its real value in our life
• Imbibe Minimalism, Essentialism 
• Revisit our belief system and perception about Scarcity
• Better personal financial planning could help reduce the tendency to fall prey to the bias
• Focus on Holistic well-being, giving sufficient focus to non-materialistic aspects of our personality/ life also. 

Scarcity = Rarity + Value