The Truth About Relativity

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  • Topic: The Economist
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  • Published : February 20, 2013
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THE ECONOMIST.COM
THE ECONOMIST.COM
“The Truth About Relativity,” by Dan Ariely, The following is an ad that appeared online. SUBSCRIPTIONS
SUBSCRIPTIONS

Welcome to The Economist Subscription Center .
Pick the type of subscription you want to buy or renew.
Welcome to The Economist Subscription Center .
Pick the type of subscription you want to buy or renew.

☐ Economist.com subscription. $59.00
One-year subscription to Economist.com. includes online access to all articles from The Economist since 1997.

☐ Print subscription. $125.00
One-year subscription to the print edition of The Economist.

☐ Print & web subscription. $125.00
One-year subscription to the print edition of The Economist and online access to all articles from The Economist asince 1997.

☐ Economist.com subscription. $59.00
One-year subscription to Economist.com. includes online access to all articles from The Economist since 1997.

☐ Print subscription. $125.00
One-year subscription to the print edition of The Economist.

☐ Print & web subscription. $125.00
One-year subscription to the print edition of The Economist and online access to all articles from The Economist asince 1997.

Who would want to buy the print option alone, when you can get the Internet and the print subscription for the same price? I suspect the clever people at the office of the Economists were manipulating me. I am pretty certain they wanted me to skip the Internet-only option (because the ad was online, and this would probably be my first choice). Instead, they made sure I skipped the Internet-only option and jumped to the more expensive option: Internet and print.

They know something about human behavior. People rarely choose things in absolute terms. We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another.

The truth is, I don’t know what a subscription is worth! I may not have known whether the Internet-only subscription at $59 was a better deal than the print-only option at $125. But I certainly know that the print-and-Internet option at $125 is better than the print-only option at $125. The combination package makes the Internet subscription free. A steal! And that is what the vast majority of subscribers chose, the Internet and print deal.

Here is what is going on here. Most people don’t know what they want unless they see it in context. We don’t know what kind of racing bike we want until we see some excellent racers riding on Tour de France bikes with a type of gears they say are the best. We don’t know what speaker system or laptop we want until we sample one that works better than the previous one. We don’t even know what we want to do with our lives, until we find a relative or friend who is doing just what we think we should be doing. Everything is relative. That’s the point. Like an airplane pilot landing in the dark, we want runway lights on either side of us, guiding us to the place where we can touch down our wheels.

In the case of The Economist, the decision would take a bit of thinking. Thinking is difficult and sometimes unpleasant. So The Economist’s marketers offered us a no brainer; relative to the print-only option, the print-and-Internet option is clearly superior.

They aren’t the only ones who understand the importance of relativity. Looking for a wide screen TV? 36-inch Panasonic for $690
42-inch Toshiba for $850
50-inch Philips for $1,480

The store knows it’s difficult to compute the value of different options. Who really knows if the Panasonic at $690 is a better deal than the Philips at $1,480? But the store knows that most people will take the middle choice when given three. If the store wants to move the Toshibas, they price and place them to sell .

Another trick. High-priced entrees on the menu boost revenue for the restaurant. Even though people generally do...
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