I’ve noticed people buying packets of Shoyuemi snackfrom the drinks stall and I wonder why. The Shoyuemi seaweed snack – a crispy cracker made from soy sauce and vegetable essence – whilst delicious, is nowhere worth its price of $0.50. Visit a value-dollar shop and you would find that 30 packets of the same Shoyuemi snack costs a mere $3.60 in total, meaning that the cost of each packet is $0.12. In contrast, the Shoyuemi snack sold in the canteen is almost four times its original price! Assuming that the Shoyuemi snack is part of a monopolistic competitive titbit market, by right, a rational student is unlikely to purchase a packet of Shoyuemi snack at all.
This curiosity thus begs the question of why and how an overpriced snack can survive in the school canteen. A theory that comes to mind immediately is that the drinks stall is in itself a monopoly within the school compound. As such, the demand for Shoyuemi snack is very price inelastic and even at a high price, there is still a sizeable quantity demanded. However, this theory fails to convince me due to two key reasons. The first being that Eunoia can hardly be considered as isolated. With Giant and a value-dollar store a stone’s throw away from school, buying a Shoyuemi snack at a cheaper price is entirely possible and so the drinks stall cannot be considered a monopoly. Secondly, as a ‘want’ and not a ‘need’, the demand for a snack is more likely to be price elastic and the Shoyuemi snack would be unable to fetch such a high price.
Does this therefore mean that students are irrational decision-makers? Yes, irrational in the sense that their decision-making does not align with the description of the commonly-used economic theory of rational decision-making. According to this theory, a rational consumer makes prudent and logical decisions that maximises his/her welfare. However, this theory assumes that consumers have perfect information and unlimited time to deliberate the available choices.
About 60 years ago, economist Herbert Simon challenged this view with his notion of ‘bounded rationality’. He asserts that decision-makers, ‘instead of trying to maximise value in a given choice, aim at satisficing’, which is to ‘search for alternatives that are good enough according to some pre-established criteria’. As such, students might be unaware of the price of Shoyuemi outside school or they might not have had the time to explore other options. Moreover, students could have preconceived biases against snacks from value-dollar shops. For example, although this sounds foolish, the transparent plastic wrap over the value-dollar shop Shoyuemi makes me doubtful of its authenticity. Otherwise, one might be hesitant to buy Shoyuemi in bulk (even though Shoyuemi-addicts probably buy more than 30 packets of Shoyuemi over the span of a year). These reasons add up to explain why an overpriced snack is still on demand in spite of more reasonably-priced options nearby.
Now, suppose that the Shoyuemi snack is sold for $1 instead, the same price as that of a bao in the school canteen. Would you still be willing to pay for it? Given the theory of bounded rationality, that people would be willing to pay for the snack at a suboptimal price as long as it satisfies their craving, the snack should still be on demand. Yet, I know I won’t buy a $1 Shoyuemi snack, because its price is clearly unreasonable relative to that of other snacks. Consider this scenario: if I were the drinks stall auntie and am insistent on pricing the Shoyuemi snack at $1, is there a way I could do this and still make it palatable for students?
In marketing, there exists a strategy of price framing, which is when a product is presented in the context of other related products. In a Psychology Today article titled ‘Pricing and Framing: When Are We Likely to Pay More for Products’, Dr. Gizen Saka suggests that the introduction of a super-premium expensive product that may not be profitable in its own right could make the next option down seem more attractive. For example, if the Shoyuemi snack is sold at $1 beside a packet of Oreo priced at $0.50, the possibility that you would buy the Shoyuemi snack is very low. On the other hand, should a Roller Coaster snack, priced absurdly at $2, be introduced to the snack basket, you would now feel more comfortable buying the $1 Shoyuemi snack since you consider it to be a more affordable, middle-ground option.
Similarly, despite the lack of an extremely expensive product, I propose that the popularity of the Shoyuemi snack within the school compound could also be attributed to its relative price. Compared to everything else sold in the vicinity of the canteen, such as a $1 bao or a $1.20 drink, the Shoyuemi snack is considered to be reasonably priced, thereby explaining its persistent demand.
Ultimately, the secret
to the mysterious survival of the $0.50 Shoyuemi
snack lies in our not-so-rational decision-making. Knowing how the inflated price
of a Shoyuemi snack plays with your
mind, would you ever look at that tricky, cunning and snaky $0.50 Shoyuemi snack in the same way again?
Ackerman, F., Goodwin, N., Nelson, J., Weisskopf, T. (2014). Macroeconomics in context. M.E. Sharpe.
Barros, G. (2010). Herbert A. Simon and the concept of rationality: boundaries and procedures. Brazilian Journal of Political Economy, 30(3), 455-472.
Gigerenzer, G., & Selten, R. (Eds.). (2002). Bounded rationality: The adaptive toolbox. MIT press.
People-triggers. (2015, January 30). Marketing Psychology: Price Framing. Retrieved, 2018, August 4, from https://peopletriggers.wordpress.com/2015/01/30/marketing-psychology-price-framing/
Saka, G. (2011, September 30). Pricing and Framing: When Are We Likely to Pay More for Products? Retrieved, 2018, August 4, from https://www.psychologytoday.com/intl/blog/the-decision-lab/201109/pricing-and-framing-when-are-we-likely-pay-more-products
Rebekah Seow (18-A1)