Research results like the following have impelled the behavioral economics movement:
When given a choice, 73 percent of a sample of college students chose a Lindt Truffle for $0.15 versus a Hershey's Kiss for $0.01. However, 69 percent chose the Hershey's Kiss for free versus the Lindt Truffle for $0.14. In each case, the students stood to save $0.14 by choosing the Hershey's Kiss but the Hershey's Kiss was not favored until it was completely free.
In a recent shopper behavior study, a significantly higher percentage of shoppers chose a bundled food offering that included a standard snack item and a decadent condiment for $2.00 off the decadent condiment versus $2.00 off the combination as a whole.
In each of these studies, consumers' decisions were inconsistent with what rational economic theory would predict. Rational economic theory - founded in maximizing expected utility - would have predicted that the percentage of people buying each option would be equal because the expected utility of each option was the same: a savings of the same amount of money.
But in these studies this didn't happen. Why not? Behavioral economics.
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