What Is the Scarcity Principle?

Scarcity principle
(Last Updated On: August 3, 2017)

In social psychology, the scarcity principle refers to the tendency to place a higher value on things that are perceived as rare while devaluing things that are seen as common or abundant.

Learn more about how marketers take advantage of the scarcity principle to persuade people to purchase goods and services.

The Psychology Behind the Scarcity Principle

Browsing through the weekly ad for your local grocery store, you notice that several items have a large notation beside them stating “Limited Quantity!” Suddenly, you find yourself wanting to rush down to the market and get some of the peaches, strawberries, and plum that the store assures you are in short supply.

Why is it that when we learn something is scarce or limited, we suddenly want it more? Psychologists refer to this tendency as the scarcity principle, sometimes referred to as the scarcity technique or feigned scarcity. People tend to place a higher value on items that are scarce, while placing a lower value on items that are plentiful.

Marketers are also well-aware of this tendency and use it often to advertise and sell products and services.

Consider how often you see or hear the following types of phrases each and every day:

  • “Hurry! Limited time offer!”
  • “Last chance sale!”
  • “Only five items left in stock!”

Such statements urge you to get in on the offer while there’s still time; to add the item to you online cart and click purchase before someone else beats you to it. Such tactics work surprisingly well. If you’ve ever felt a sense of urgency to make a purchase before a sale ends or before a product runs out, you’ve just been influenced by the scarcity principle.

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How Scarcity Impacts Consumers

Consider the number of U.S. consumers who head out to shop the day after Thanksgiving, known as “Black Friday.” The infamous shopping day relies on the scarcity technique to drawn shoppers into the stores. Since the sale only last one day and many items are limited on a first-come, first-serve basis, people know that if they don’t get to the store and buy the items they want, they may not be able to get them later.

Of course, just telling people something is scarce doesn’t mean that they will necessarily believe it. The scarcity principle is more likely to have an effect when people actually have proof of scarcity. If they have actually searched for an item they want only to find that it is sold out or limited, they are more likely to want the item even more and find it even more desirable.

Researchers have also demonstrated the effectiveness of scarcity in experimental settings. In a 1975 study by Worchel, Lee, and Adewole, volunteers were given a chocolate chip cookie to taste and then rate on several different areas. In some cases, the cookie was drawn from a jar of 10 cookies, while in other instances it was taking from a jar containing only two cookies. Despite the fact that all of the cookies were exactly the same, volunteers rated the cookie drawn from the jar containing two cookies as better than the one drawn from the jar containing 10 cookies.

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Scarcity Can Lead to Bad Decisions

But scarcity doesn’t just drive people to buy things they normally wouldn’t or rate things as more desirable that they would be otherwise – it also makes people more likely to make mistakes and bad decisions.

Psychologist Eldar Shafir and economist Sendhil Mullainathan have found that when people feel they are lacking something, whether it is money, love, or material items, their mental abilities are less efficient and more prone to errors. Shafir and Sendhil suggest that since so much of a person’s cognitive resources are consumed with scarcity, there is less brainpower available for other aspects of life. In experiments, they found that poor individuals were less likely to make accurate decisions in the face of a challenging financial situation, even though the poor participants had the same levels of fluid intelligence as the wealthier participants.

“Obviously, in that experiment, we controlled for everything we could, but at the end of the day, these are rich vs. poor and you could say that they differ in things like health and education,” Shafir explained to the American Psychological Association’s Monitor on Psychology. “So then we went to India and studied sugar cane farmers, who earn the bulk of their income once a year after they harvest, and then have to make sure their funds keep them going until the following harvest. These are people who are basically rich after the harvest but poor before, so we conducted these cognitive tests on the same farmers, two months before and two months after harvest. It’s the same person, same education and values, but they, too, scored the equivalent of 10 IQ points less before harvest compared to after harvest.”

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References

 Novotney, A. (2014). The psychology of scarcity. Monitor on Psychology, 45 (2), 28. 

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