Behavioral Economics: The Popcorn Experiment

Introduction

• Context of the experiment: Decision-making at a movie theater's concession stand.
• Initial choices:
  • Small popcorn for $3
  • Large popcorn for $7

Observations and Initial Reactions

• Most people choose the small size due to the perception that $7 is too much for popcorn.
• Cameras were set up to observe real moviegoers' choices.
• Real moviegoers expressed that $7 seemed excessive for popcorn.

Introduction of a New Option

• A medium size is introduced at $6.50.
• New choices:
  • Small for $3
  • Medium for $6.50
  • Large for $7
• The objective: To see if adding a medium size influences choices.

Results of the Experiment

• The introduction of the medium size significantly changed the decision-making process.
• Many opted for the large, viewing it as a better value compared to the medium.
• People perceived the large as more appealing and a better bargain when compared to the medium.

Insights and Behavioral Patterns

• The concept of value perception: The large popcorn appears to be a better deal when framed against the medium option.
• Many customers ended up spending more than initially planned due to perceived value.
• The experiment highlights how adding a decoy option (medium) can influence consumer behavior and increase spending.

Conclusion

• The experiment demonstrates the power of context and presentation in decision-making.
• Perceived value can significantly influence consumer choices, even leading to spending more.
• Behavioral economics techniques, like introducing a seemingly less valuable option, can sway purchasing decisions.