The scarcity bias

Two experiments provided empirical support for the scarcity bias, that is, when the subjective value of a good increases due to the mere fact that it is scarce. We define scarcity as the presence of limited resources and competition on the demand side (i.e. not enough for two people). In Experiment 1, 180 students were divided into two conditions. The same good was abundant in one condition but scarce in the other one. The scarcity condition involved a partner (competitor) to create scarcity, while the abundant condition did not. Results showed that more participants chose a good when it was scarce than when it was abundant, for two out of four sets of items (ballpoints, snacks, pencils, and key rings). Experiment 2 employed 171 participants and a WTA (willingness to accept) elicitation procedure of the subjective value of the good. Results showed that the scarce good was given a higher WTA price by those participants choosing it, than by those who did not, compared to the WTA of the abundant good, despite the fact that both types of participants assigned a lower market price to the scarce good, as compared to the abundant one.