Scarcity improves economic valuations when cognitively salient

Abstract

In an influential article, Shah et al. (2015) hypothesized that resource scarcity weakens the effect of irrelevant contextual factors on economic valuations. The hypothesis that “scarcity frames value” qualifies the applicability of standard theories of rational choice and suggests a revised psychological foundation. In support, Shah et al. showed that differences in the willingness to pay for a commodity depending on where it was purchased (a fancy hotel vs. a run-down store) and in the willingness to travel to receive a fixed discount depending on the size of the purchase (a cheap vs. an expensive computer) were smaller among those with low personal incomes. In a large-scale preregistered experiment (N = 3,442), we tested whether scarcity framed value during the COVID-19 pandemic as well. The sample exhibited the canonical context effects overall. Consistent with the hypothesis, these effects tended to be smaller among those facing higher scarcity of personal income. Extending the original findings, economic valuations of low-income earners improved, particularly when scarcity was on the minds of the participants, as those with high financial and other resource scarcity concerns were less susceptible to the context effects. Our findings indicate that scarcity frames value, especially when it is cognitively salient, and emphasize the importance of considering contextual factors when attempting replications.