Robert Cialdini’s theory of influence lists ‘authority’ and ‘scarcity’ among the six principles of persuasion. And there are plenty of examples of both in the consumer market. Celebrity endorsements are an example of the former, while inaugural or exclusive offers, limited-edition etc. are examples of the latter. In fact, even airlines egg you to push the trigger by reminding you, ‘3 seats left’. Authority and scarcity are extensively used by peddlers to maximise the perceived value of a product/service regardless of its real value. More so when things which don’t have an overt physical utility (except inviting envy) like art, gold or luxury goods are in play. Art is perhaps where the value truly lies in the eyes of the beholder. Its value is randomly determined by prices quoted by different pairs of eyes in an art-auction. The price of gold also has gyrated in the last 15 years with the highest price being 6x its lowest price.
My Best Pick 2016
Ranting of a value investor
Economic growth is in limbo but asset prices continue to be valued abstractly
Summer wine and salad
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