Money Hacks: don’t get tricked into buying things you don’t need
Money Hacks is a series exploring Behavioural Economics concepts, illustrating how unconscious biases influence the decisions we make with money. By understanding these biases and learning to avoid them, we can spend smarter, save more, and make better financial decisions overall.
Anyone who tried to buy toilet paper in the early days of COVID-19 knows that it wasn’t easy to find. First, there were reports of a looming toilet paper shortage. This led people to worry about running out. Then, they started stocking up, buying far more than they needed. Shelves quickly emptied.
Then just like that, the fear of a toilet-paper shortage created a toilet-paper shortage.
The thing is, there wasn’t any change in the supply of toilet paper. The shortage was caused by the scarcity bias.
What is the scarcity bias?
The scarcity bias states that the more difficult it is to acquire an item the more we value it. In other words, if we think something is scarce, we want it more. The recent run on toilet paper is just one recent example. But the Scarcity Bias is much more common than you may think. Whether it’s concert tickets for your favourite band, a popular brand of running shoe or a limited-edition collectible – if you think something is scarce, you tend to see it as more valuable.
The key word here is think. Something doesn’t have to be scarce to make us want it more. We only have to think it’s scarce. And marketers know this.
Marketers use the scarcity bias to get you to buy things
Do any of these sales pitches sound familiar?
- Limit of 4 per household
- Sale ends Friday
- Limited time offer
- This item is selling fast/or has low stock
Marketers want to make you feel like something is scarce - either the product they’re selling or the amount of time available to get it. In most cases, the scarcity is artificial. After all, there’s usually nothing stopping them from extending a sale another week or making more of the product. But the sense of scarcity can cause you to make an impulse purchase or pay more for something. And this can put a big dent in your budget.
The key to beating the scarcity bias
Once you’re aware of the scarcity bias, it’s relatively easy to see when it’s being used to sell you something. And it can be just as easy to avoid. If you’re tempted by an offer that has a limited quantity or a limited time frame, just hit pause. Ask yourself a few questions: Is the scarcity real or artificial? Is this something I would buy if it wasn’t scarce? If I don't buy this, what else could I use the money for?
And once you get in the habit of watching for the scarcity bias, you’ll make fewer impulse purchases and make better buying decisions.