Group items tagged

There's one particularly cunning type of pricing strategy that marketers use to get you to switch your choice from one option to a more expensive or profitable one. It's called the decoy effect. Imagine you are shopping for a Nutribullet blender. You see two options. The cheaper one, at $89, promotes 900 watts of power and a five-piece accessory kit. The more expensive one, at $149, is 1,200 watts and has 12 accessories. Which one you choose will depend on some assessment of their relative value for money. It's not immediately apparent, though, that the more expensive option is better value. It's 50% more powerful but costs almost 80% more. It does have more than twice as many plastic accessories, but what are they worth? Now consider the two in light of a third option. This one, for $125, offers 1,000 watts and nine accessories. It enables you to make what feels like a more considered comparison. For $36 more than the cheaper option, you get four more accessories and an extra 100 watts of power. But if you spend just $24 extra, you get a further three accessories and 200 watts more power. Bargain! You have just experienced the decoy effect.

A headline in The New York Times today reads "In the Shopping Cart of a Food Stamp Household: Lots of Soda." Is it true? The story itself provides hints that the headline is misleading, and likely to damage the image of the SNAP program and its beneficiaries. This is dangerous, considering that many readers look at clickbaity headlines, like the NYTimes one, but don't read stories. SNAP households aren't different than the rest of households. Most Americans buy and drink way too much soda and, as a result, obesity and Type II diabetes have reached epidemic levels. The story says that households that receive food stamps spend 9.3% of their grocery budget on soft drinks, while families in general spend 7.1%. This is one of those cases when reporting just percentages, and not taking into account other variables, such as total spending in groceries, sounds fishy.

Interesting look at data around private healthcare and marketisation. Each year, for well over a decade, more people have faced higher health insurance deductibles. The theory goes like this: The more of your own money that you have to spend on health care, the more careful you will be - buying only necessary care, purging waste from the system. But that theory doesn't fully mesh with reality: High deductibles aren't working as intended. A body of research - including randomized studies - shows that people do in fact cut back on care when they have to spend more for it. The problem is that they don't cut only wasteful care. They also forgo the necessary kind. This, too, is well documented, including with randomized studies. People don't know what care they need, which is why they consult doctors.