No CrossRef data available.
Article contents
Free-baiting: policy applications for freeness removal and the zero price effect
Published online by Cambridge University Press: 17 November 2020
Abstract
This paper explores “free-baiting” as a behavioral policy tool for reducing participation in socially undesirable activities. Empirical evidence establishes that when a good or activity ceases to be free, consumption plummets. A free-baiting policy creates conditions of freeness in order to subsequently take advantage of the discouraging effects of freeness removal. The initial free phase shifts consumers’ reference price for the target activity to zero. Subsequently, prices are returned to market levels – a staggering price increase. Behavioral factors enhance the salience of that price increase. It occurs along the steepest part of the money utility curve. It is especially salient because it is presented as a loss. In addition, it may trigger the endowment effect: forcing people to give something up in order to partake in the target activity once it is no longer free. Moreover, these discouraging effects can enhance the efficiency and effectiveness of other interventions. Free-baiting manufactures a policy window, creating a moment in which many consumers simultaneously confront obstacles to the target activity. The effects of free-baiting are illustrated using several hypothetical interventions, including rush-hour roadway tolls, sugary beverages, gasoline and tobacco.
- Type
- New Voices
- Information
- Copyright
- Copyright © The Author(s), 2020. Published by Cambridge University Press
References
Abdul Latif Jameel Poverty Action Lab (2011), ‘Bulletin: The price is wrong’, Available at: https://www.povertyactionlab.org/sites/default/files/publications/The%20Price%20is%20Wrong.pdf.Google Scholar
Abel, M., Burger, R., Carranza, E. and Piraino, P. (2019), ‘Bridging the intention-behavior gap? The effect of plan-making prompts on job search and employment’, American Economic Journal: Applied Economics, 11(2): 284–301.Google Scholar
Ariely, D. (2008), Predictably irrational: The hidden forces that shape our decisions, New York: Harper.Google Scholar
Armitage, C. and Arden, M. (2008), ‘How useful are the stages of change for targeting interventions? Randomized test of a brief intervention to reduce smoking’, Health Psychology, 27(6): 789–798.CrossRefGoogle ScholarPubMed
Arora, S., Ter Hofstede, F., and Mahajan, V. (2017), ‘The implications of offering free versions for the performance of paid mobile apps’, Journal of Marketing, 81(6): 62–78.CrossRefGoogle Scholar
Bhutta, N. and Dettling, L. (2018), ‘Money in the bank? Assessing families’ liquid savings using the survey of consumer finances,’ FEDS Notes, Washington: Board of Governors of the Federal Reserve System.CrossRefGoogle Scholar
Bronsteen, J., Buccafusco, C. and Masur, J. S. (2013), ‘Well-being analysis vs. cost-benefit analysis’, Duke Law Journal, 62(8): 1603–1747.Google Scholar
Bubb, R. (2015), ‘TMI? Why the optimal architecture of disclosure remains TBD, Michigan Law Review, 113(6): 1021–1427.Google Scholar
Campaign for Tobacco-Free Kids (2020), ‘Cigarette tax increases by state per year 2000–2019’, Available at: https://www.tobaccofreekids.org/assets/factsheets/0275.pdf.Google Scholar
Carruthers, B. (2010), ‘The meanings of money: a sociological perspective’, Theoretical Inquiries in Law, 11(1): 51–74.CrossRefGoogle Scholar
Centers for Disease Control and Prevention (2020), ‘The tax burden on tobacco, 1970–2018’, Available at: https://chronicdata.cdc.gov/Policy/The-Tax-Burden-on-Tobacco-1970-2018/7nwe-3aj9/data.Google Scholar
Chen, B.M. (forthcoming), ‘The expressiveness of regulatory trade-offs’, Georgia Law Review.Google Scholar
Chen, H., Marmorstein, H., Tsiros, M., and Rao, A. R. (2012), ‘When more is less: the impact of base value neglect on consumer preferences for bonus packs over price discounts’, Journal of Marketing, 76(4): 64–77.CrossRefGoogle Scholar
Chiou, L. and Tucker, C. (2013), ‘Paywalls and the demand for news’, Information Economics and Policy, 25(2): 61–69.CrossRefGoogle Scholar
CNN Money (2008), ‘United to charge for checked luggage’, Available at: https://money.cnn.com/2008/06/12/news/companies/united_bags/.Google Scholar
Cohen, J. and Dupas, P. (2010), ‘Free distribution or cost-sharing? Evidence from a randomized malaria prevention experiment’, Quarterly Journal of Economics, 125(1): 1–45.CrossRefGoogle Scholar
Conner, M. and Higgins, A. (2010), ‘Long-term effects of implementation intentions on prevention of smoking uptake among adolescents: A cluster randomized controlled trial’, Health Psychology, 29(5): 529–538.CrossRefGoogle ScholarPubMed
Davis, R. and Jason, L. (1988), ‘The distribution of free cigarette samples to minors’, American Journal of Preventive Medicine, 4(1): 21–26.CrossRefGoogle ScholarPubMed
Evans, J.S.B.T. (2008), ‘Dual-processing accounts of reasoning, judgment, and social cognition’, Annual Review of Psychology, 59 : 255–278.CrossRefGoogle ScholarPubMed
Fiske, A. and Tetlock, P. (1997), ‘Taboo Trade-offs: Reactions to transactions that transgress the spheres of justice’, Political Psychology, 18(2): 255–297.CrossRefGoogle Scholar
Foubert, B. and Gijsbrechts, E. (2016), ‘Try it, you'll like it—or will you? The perils of early free-trial promotions for high-tech service adoption’, Marketing Science 35(5): 810–826.CrossRefGoogle Scholar
Hagger, M. and Luszczynska, A. (2014), ‘Implementation intention and action planning interventions in health contexts: State of the research and proposals for the way forward’, Applied Psychology: Health and Well-Being, 6(1): 1–47.Google ScholarPubMed
Han, E. and Powell, L. M. (2013), ‘Consumption patterns of sugar-sweetened beverages in the united states’, Journal of the Academy of Nutrition and Dietetics, 113(1): 43–53.CrossRefGoogle ScholarPubMed
Huck, S., Kirchsteiger, G. and Oechssler, J. (2005), ‘Learning to like what you have – explaining the endowment effect’, Economic Journal, 115(505): 689–702.CrossRefGoogle Scholar
Hüttel, B. A., Schumann, J. H., Mende, M., Scott, M. L., and Wagner, C. J. (2018), ‘How consumers assess free e-services’, Journal of Service Research, 21(3): 267–283.CrossRefGoogle Scholar
International Agency for Research on Cancer (2011), ‘Tax, price and aggregate demand for tobacco products’, in IARC Handbooks of Cancer Prevention, Tobacco Control, Vol. 14: Effectiveness of Tax and Price Policies for Tobacco Control, Lyon: WHO Press, 91–135.Google Scholar
Jha, P. and Peto, R. (2014), ‘Global effects of smoking, of quitting, and of taxing tobacco’ New England Journal of Medicine, 370(1): 60–68.CrossRefGoogle ScholarPubMed
Kahneman, D. and Tversky, A. (1979), ‘Prospect theory: An analysis of decision under risk’, Econometrica, 47(2): 263–291.CrossRefGoogle Scholar
Kahneman, D., Knetsch, J. and Thaler, R. (1991), ‘Anomalies: The endowment effect, loss aversion, and status quo bias’, Journal of Economic Perspectives, 5(1): 193–206.CrossRefGoogle Scholar
Kamins, M. A., Folkes, V. S., and Fedorikhin, A. (2009), ‘Promotional bundles and consumers’ price judgments: when the best things in life are not free’, Journal of Consumer Research, 36(4): 660–670.CrossRefGoogle Scholar
Kelman, S. (1981), ‘Cost–benefit analysis: An ethical critique’, Regulation, 5(1): 33–40.Google ScholarPubMed
Kremer, M. and Miguel, E. (2007), ‘The illusion of sustainability: Effect of international economic aid on supply of essential commodities in Kenya’, Quarterly Journal of Economics, 122(3): 1007–1065.CrossRefGoogle Scholar
Kuczmarski, M. F., Mason, M. A., Schwenk, E. A., Evans, M. K., and Zonderman, A. B. (2010), ‘Beverage consumption patterns of a low-income population’, Topics in Clinical Nutrition, 25(3): 191–201.CrossRefGoogle ScholarPubMed
Leung, C. W., Ding, E. L., Catalano, P. J., Villamor, E., Rimm, E. B., and Willett, W. C. (2012), ‘Dietary intake and dietary quality of low-income adults in the supplemental nutrition assistance program’, American Journal of Clinical Nutrition, 96(5): 977–988.CrossRefGoogle ScholarPubMed
Ma, H, Mo, Z., Zhang, H., Wang, C., and Fu, H. (2018), ‘The temptation of zero price: event-related potentials evidence of how price framing influences the purchase of bundles’, Frontiers in Neuroscience 12(251): 1–8.CrossRefGoogle ScholarPubMed
Maynard, M. (2008a), ‘American Airlines to begin charging for checked luggage’, New York Times, Available at: https://www.nytimes.com/2008/05/21/business/worldbusiness/21iht-amr.4.13100744.html.Google Scholar
Maynard, M. (2008b), ‘Like American, more airlines add fees for checking luggage’, New York Times, Available at: https://www.nytimes.com/2008/06/13/business/13bags.html.Google Scholar
Milkman, K., Beshears, J., Choi, J., Laibson, D. and Madrian, B. (2013), ‘Planning prompts as a means of increasing preventive screening rates’, Preventive Medicine, 56(1): 92–93.CrossRefGoogle ScholarPubMed
Nickerson, D. and Rogers, T. (2010), ‘Do you have a voting plan?: Implementation intentions, voter turnout, and organic plan making’, Psychological Science, 21(2): 194–199.CrossRefGoogle Scholar
Nicolau, J. and Sellers, R. (2012), ‘The free breakfast effect: An experimental approach to the zero price model in tourism’, Journal of Travel Research, 51(3): 243–249.CrossRefGoogle Scholar
Palmeira, M. M., and Srivastava, J. (2013), ‘Free offer ≠ cheap product: a selective accessibility account on the valuation of free offers,’ Journal of Consumer Research, 40(4): 644–656.CrossRefGoogle Scholar
Pauwels, K. and Weiss, A. (2008), ‘Moving from free to fee: how online firms market to change their business model successfully’, Journal of Marketing, 72(3): 14–31.CrossRefGoogle Scholar
Raghubir, P. (2004), ‘Free gift with purchase: promoting or discounting the brand?’, Journal of Consumer Psychology, 14(1): 181–186.CrossRefGoogle Scholar
Rehm, C. D., Matte, T. D., Van Wye, G., Young, C., and Frieden, T. R. (2008), ‘Demographic and behavioral factors associated with daily sugar-sweetened soda consumption in new york city adults,’ Journal of Urban Health, 85(3): 375–385.CrossRefGoogle ScholarPubMed
Rogers, T., Milkman, K., John, L. and Norton, M. (2015), ‘Beyond good intentions: Prompting people to make plans improves follow-through on important tasks’, Behavioral Science and Policy, 1(2): 33–41.CrossRefGoogle Scholar
Ruggeri, K. et al. (2020), ‘Replicating patterns of prospect theory for decision under risk’, Nature Human Behaviour, 4(6): 622–633.CrossRefGoogle ScholarPubMed
Shampanier, K., Mazar, N. and Ariely, D. (2007), ‘Zero as a special price: The true value of free products’ Marketing Science, 26(6): 742–757.CrossRefGoogle Scholar
Sunstein, C. R. (2019), ‘Rear visibility and some unresolved problems for economic analysis (with notes on experience goods)’, Journal of Benefit-Cost Analysis, 10(3): 317–350.CrossRefGoogle Scholar
Tauras, J., Pesko, M., Huang, J., Chaloupka, F. and Farrelly, M. (2016), ‘The effect of cigarette prices on cigarette sales: Exploring heterogeneity in price elasticities at high and low prices’, NBER Working Paper 22251, Available at: https://www.nber.org/papers/w22251.pdf.CrossRefGoogle Scholar
United States Department of Transportation (2019), ‘U.S. air carrier traffic statistics through September 2019’, Scheduled passenger enplanements on domestic and international flights. Available at: https://www.transtats.bts.gov/TRAFFIC/.Google Scholar
United States Executive Order No. 12,291 (1981), Available at: https://www.archives.gov/federal-register/codification/executive-order/12291.html.Google Scholar
United States Transportation Security Administration (2019), Freedom of Information Request 2019-TSFO-00628 (on file with author).Google Scholar
Varol, Ozan O. (2017), ‘Structural rights’, Georgetown Law Journal, 105(4): 1001–1054.Google Scholar