The Cost of Free

Zero is another price and we tend to over value it. Even when relative value remains constant, the absolute change from 1->0 holds more salience than the same relative change of n->/n-1/

  • This over-valuation of free becomes a real problem when valuing a free item against another item
  • Most transactions have an upside and downside, but with free we forget the downside. We perceive free as no visible loss (we aren’t directly paying for it)
    • However, as shown, we can miss-value a free item or we can incur unseen costs such as opportunity or time costs

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References

1.
Ariely, D. D. Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions. (Harper Perennial, New York, NY, 2010).