The scarcity principle: Limited availability increases perceived value
We tend to assign more value to things that are perceived as scarce.
Why do people often feel the urge to buy something during a sale?
Why do retailers sometimes deliberately underdeliver a new product to stores on the day it is launched?
What is the psychological effect of limiting access to information through censorship?
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The scarcity principle is our tendency to assign a higher value to things that are perceived as scarce.
The scarcity principle is a heuristic: to save time and effort, we use a rule of thumb by quickly determining the value of an object or opportunity based on how rare it seems. We are usually right to assume that things that are difficult to obtain are of better quality than things that are easier to obtain. If we think something is rare or difficult to obtain, we are more likely to desire it and act quickly to obtain it. Therefore, the scarcity principle is often used by persuaders to create a sense of urgency or exclusivity.
A central feature of the scarcity principle is our tendency to prefer to avoid losses rather than achieve equivalent gains (loss aversion), especially under conditions of risk and uncertainty. We tend to feel the pain of losing something more intensely than the pleasure of gaining the same thing. When we know or discover that a desirable item is in short supply, we may lose the opportunity to obtain the item.
Losing an opportunity restricts our freedom of choice. When we perceive that our freedom of choice is threatened or restricted, we may experience an emotional response known as psychological reactance. This reactance motivates us to maintain or restore our freedom by resisting the imposed influence. When an item becomes less available, we will unconsciously react against this restriction of our freedom by wanting to possess it more than we did before. The less available the item is, the more we value and desire it. To make sense of this increased desire, we begin to attribute positive qualities to it. The qualities of the item itself obviously do not improve due to its scarcity, only our view of them changes.
The scarcity principle works most effectively under two circumstances. Items that have recently become scarce are valued more highly than items that were already scarce. And scarce items are more valued when we compete with others for them.
Examples of the scarcity principle
👉 In the cookie jar experiment, participants received a cookie from a glass jar containing two (= scarcity) or ten (= abundance) cookies. The jars used were identical and all cookies were exactly the same. Participants rated cookies from a jar of two cookies as more desirable and valuable than cookies from a jar of ten cookies. Some participants were given a jar of ten cookies that was replaced with a jar of two cookies before they received their cookie. This decline from abundance to scarcity made the cookies even more desirable and valuable than in the case in which participants only received a jar with two cookies. This desirability increased even more when participants were told that their ten cookies were needed to provide other participants with cookies (= competition).
👉 Collectibles, such as trading cards or stamps, are considered more valuable if they are rare. The price of rare items is based on their scarcity. To increase the perceived value of a product, retailers may announce (truthfully or not) that the product is in short supply and may soon become unavailable. Or they may deliberately undersupply stores on the day a new product is launched, making it appear as if the product is in short supply and the competition to obtain it is fierce. Real estate agents can let indecisive clients know (truthfully or not) that there is competition from another potential buyer who is interested in the house.
👉 If a customer in a store expresses interest in a product, a salesperson may claim that it was sold half an hour ago and is probably the last product available. This lost availability makes the product more attractive to the customer, who may ask the salesperson to check the warehouse to see if an unsold model is still available. The salesperson will then ask if the customer is willing to purchase the product at the stated price if it turns out to be available. If the customer agrees, the salesperson always returns from the warehouse with the happy news that an unsold model has been found.
👉 The use of temporary offers, for example that a product is available until a certain date, makes a product appear scarce and therefore more attractive. Bargain sales, such as on Black Friday, offer people the opportunity to purchase products with limited availability on a first-come, first-serve basis at discounted prices for a limited time only.
👉 Sometimes salespeople increase the pressure on their customers by telling them that if they don't decide immediately, the deal will fall through. By forcing an immediate decision, their customers may become fearful that they will lose the deal and may not take the time to evaluate the deal objectively.
👉A real estate agent might try to persuade a reluctant client by informing them that another party has expressed interest in the property, as the potential loss to a competitor can make the property seem more valuable.
👉 When access to certain information is restricted by censorship, we have a greater desire to access the information than without censorship. We also believe the information more than without the restriction, even without having read or seen the information. This means that individuals can get people to agree more with their arguments by getting them censored.
👉 Restricting access to sexually oriented material is likely to increase non-adults’ desire for sexual material and can cause them to see themselves as the kind of person who enjoys such material. For example, if a book is labelled ‘adults only,’ non-adults are not only more likely to want to read the book than if it were not labelled as such, but they also think they will enjoy it more.
How to reduce the impact of the scarcity principle
While a heuristic like the scarcity principle generally works well, it can leave us vulnerable to those who create a false sense of scarcity. Protecting ourselves from the negative consequences of biases can be tiresome, but it can be worth it when the stakes are high.
⚒️ Become aware of the scarcity principle
Becoming aware of the potential adverse influence of the scarcity principle is the first step in reducing its impact.
When making an important or costly decision that could be influenced by a perceived scarcity of resources or opportunities, especially if there is competition involved, take a step back to examine whether the scarcity principle could negatively influence the decision. Ask yourself questions such as:
🤔 Am I basing my decision on emotional responses caused by the fear of scarcity? Consider whether you have objectively assessed the situation and its possible consequences, rather than reacting emotionally to the fear of scarcity.
🤔 Is the urgency of this decision determined primarily by the perceived scarcity of the resource? Consider whether the decision is driven by the immediate pressure of scarcity, or by genuine long-term considerations.
🤔 How would my decision change if the scarcity element were removed? Consider what effect eliminating scarcity would have on your decision. Remember that the qualities of an item itself do not improve because of its scarcity.
🤔 Is this decision truly aligned with my needs and goals, life purpose and personal values? Assess whether the decision aligns with what you genuinely want or need, separate from the perceived scarcity of the resource or opportunity.
If you become aware that the scarcity principle may negatively impact your decision, take steps to mitigate its effects so that you can assess your options more objectively.
⚒️ Cultivate an abundance mindset
An abundance mindset is the belief that the world has enough resources for everyone.
With an abundance mindset, we tend to view situations from a broader perspective (broad framing), considering various options and alternatives rather than fixating on scarce resources. We are less likely to make impulsive decisions driven solely by the fear of missing out or scarcity-induced urgency. Shifting focus to abundance promotes a positive and optimistic outlook. This reduces stress caused by anxiety due to scarcity. Recognising abundance also encourages us to seek input from others, share resources, and work together toward mutually beneficial outcomes.
To cultivate an abundance mindset:
👉 Incorporate gratitude into your daily life. Expressing gratitude improves your mental and physical well-being. For example, write down three things you are grateful for every day.
👉 Focus on what you have, rather than what you lack. This is not only about your possessions, but also about physical health (You’re alive!), emotional health, loving relationships, skills, strengths, abilities and experience.
👉 Surround yourself with people who have an abundance mindset. Mindsets rub off, so spend time with people who see the glass as half full.
👉 Someone with a scarcity mindset sees limitations instead of opportunities: ‘I don’t have the necessary skills,’ or ‘There are no jobs available.’ Reduce the negative impact of these scarcity-driven, limiting thoughts.
Developing an abundance mindset requires ongoing effort and mindfulness, but it can significantly mitigate the negative influence of the scarcity principle on decision-making.
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We tend to attach more value to things that are perceived as scarce. We are usually right to assume that scarce things are of higher quality, but this assumption can make us vulnerable to those who create a false sense of scarcity. Cultivating an abundance mindset makes it less likely that we will be guided by the fear of scarcity.
References
Influence, New and Expanded: The Psychology of Persuasion, by Robert B. Cialdini PhD
5 Ways To Go From A Scarcity To Abundance Mindset, Forbes, by Caroline Castrillon
4 Ways to Use Scarcity to Persuade and Influence, Psychology Today, by Jeremy Nicholson M.S.W., Ph.D.
My blogposts about influence are available here:
https://www.a3lifedesign.com/blog-english/category/Influence
