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Economics

The limitless appeal of free

I read Dan Ariely’s Predictably Irrational over the weekend. He’s an MIT professor of behavioral economics, and he has all kinds of research into why we do the crazy, stupid and seemingly irrational things we do. (his blog)

One chapter is on the intoxicating allure of free stuff. (related paper) He shows that when we see a price lowered from, say, 15 to 10, it’s meaningful. But when a price drops from 5 to 0, it’s enthralling. We grab for stuff, even if we don’t need it. (Case in point: all the free crap we pick up at trade shows.) Lots of discussion on Tyler Cowen’s blog.