Exploiting Human Mathematical Weaknesses

Thanks to Steve Johnson at Pragmatic Marketing for the pointer to a concise Wired Wired summary of a Cornell University study (which they apparently picked up from The Atlantic - yes, that is a lot of references) revealing just how bad Americans are at math.

Because we tend to use precise numbers for small amounts and round off very large numbers (lots of zeros), [the study suggests] sellers can actually con consumers into thinking a price is smaller than it is by replacing those zeros with other digits. - from Wired's summary

The effect apparently goes beyond the familiar phenomenon of 99 cents looking more than a penny less than a dollar. When large numbers are involved (think home prices), apparently $249,673 looks like less than $249,000. The study suggests this because our brains are wired for precision with small numbers and rounding off with large ones. Ergo, precise numbers must be smaller, right? (The Cornell folks claim to have eliminated alternative explanations such as precise numbers signaling unwillingness to negotiate.)

The authors then examined more than 27,000 real-estate transactions on Long Island and in South Florida and discovered the same effect at work in real-life deals. In South Florida, having at least one zero at the end of the list price lowered the final sale price by about 0.72 percent compared with houses listed at a similar price, three zeros lowered it by 0.73 percent, and each additional zero lowered it another 0.39 percent. - from The Atlantic's summary

Bear that in mind when you are selling your next house or pricing your product. 0.72% of a $400,000 sale is enough for a couple of plasma TVs for the new abode.

Of course it should be no surprise that Americans are bad at math. Las Vegas would be just another dry, hot southwest town if that weren't so and state governments wouldn't have the lottery to generate revenue from. 

Comments

[Neil Lynch]

So that explains why the casinos are empty -- and the strip clubs are full -- when the techie conventions come to Vegas.