We looked at a house a while ago. We need to upgrade. We have 3 bedrooms and three kids. A yard would be nice. The house is older in a great location. Starting price well within our ability. When we got there for the showing, there were loads of people milling through the place. People with kids, just like us. I even knew quite a few of them – parents of my kids schoolmates.
I very very rapidly felt I gave up. That it would be no point in even considering this house. There were too many people who probably were interested, and the bidding would push the price into the stratosphere.
And, after, we mildly derogated the house. It isn’t bad, but it needs serious updating. One bathroom on the top floor, one in the basement. If the house is otherwise sound, worth it, if you have the money or ability to update it. We don’t really.
Why is this interesting, from a psychology research perspective? I teach marketing psychology, and the Aussie uses marketing psychology (and has used it to sell houses). One of the principles is scarcity. Things that are hard to get become more attractive. Such as having a crowd of people looking at a house. There is plenty of documentation on this.
But, my students have just about always brought up this intuition – if the competition is too fierce, perhaps people will simply give up. This has always been in the context of marketing a course, and the argument has been that if people get the idea that admission is very competitive, perhaps they won’t even bother to apply.
I buy this intuition, even though the power of scarcity in whetting appetites is my favorite mechanism, and I frequently fall prey to it.
The question is, when does scarcity make things more attractive and people more willing to be silly to get it. And, when does it make people give up. And, perhaps also who. What personalities are going to give up in the face of scarcity.
I can think of a few things. In some ways we were not strongly committed to this house. We had not taken mental possession of it yet, and we are well aware of the dangers of bidding on houses. Seeing that there is a competition, perhaps it is best to not even begin competing – put the energy elsewhere, where it is more likely for us to succeed. The Aussie used to do a lot of things to make people feel committed before they even came and looked at a house officially. This was not done here.
Perhaps the price. I get fired up by a pair of pants that is about to be sold out, which is of several orders of magnitude less in price than a house.
Perhaps a fairly good assessment of our possibilities. We know our price range well. The “give” we have is small. And, perhaps applicants would know that too from looking at earlier stats on what is reasonable before expending the effort. It is worth checking out.
And, perhaps a personality factor. I’m not competitive, I don’t gamble, I’m risk averse when it comes to the obvious risks.
So, when does scarcity become aversive, rather than make things more attractive?