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Calculating Consumer Happiness at Any Price

from the New York Times (Registration Required)

Could it be that humans are not quite as gullible as advertised? For a couple of decades now, social psychologists and behavioral economists have been amusing themselves manipulating consumers into doing odd things.

... Old-fashioned cost-conscious consumers would react to a price increase by lowering demand for the product, but we sometimes do just the opposite. We want to buy more of it because we assume it must be a better product — and we're so thoroughly fooled that our bodies even respond differently to it.

If you give people a placebo and tell them it's a painkiller costing $2.50, they can withstand painful shocks better than if they're told the pill costs a dime. Give them an energy drink at a discount price, and they'll perform worse on subsequent tests than if they pay full price.