How higher prices can drive up demand

HostIt's a funny thing how we think we know what we like. You would assume a good glass of wine just tastes good because of the grapes or the way it was made. But there was this study where people drank the same wine twice. When they were told it cost ninety dollars instead of ten, the pleasure parts of their brains actually lit up more. The price tag didn't just change their mind; it changed how they felt the drink. Why is it that a bigger price makes us want things more?

GuestIt really goes against the basic rule of how we buy things. Usually, when the price of a loaf of bread or a shirt goes up, people buy less of it. We look for a better deal. But some items work in the opposite way. There's a whole group of goods where the high price isn't a hurdle to get over. The high price is the whole reason people want the thing in the first place. We call these Veblen goods. Think of a very fancy watch, like a Rolex. If you could suddenly walk into a corner store and buy a Rolex for fifty bucks, the company would actually lose most of its customers. The watch still tells time perfectly well, but it stops doing its main job, which is to show everyone else how much money you have. People buy these things for what we call conspicuous consumption. That's just a fancy way of saying they want to show off their wealth and their spot in the world.

HostThat sounds like it only happens with people who have too much money to spend. Does this ever happen with normal stuff that regular people buy?

GuestIt happens more than you might think, especially when we're not experts on what we're buying. Think about when you have to pick out a diamond or maybe hire a lawyer. Most of us don't really know how to tell a great diamond from a good one, or a top-tier lawyer from a basic one. We have a gap in our knowledge. So, our brains look for a shortcut. We use a high price as a sign of high quality. We have this deep-seated belief that you get what you pay for. If you take a basic bottle of skin cream and put it in a heavy glass jar with a gold label and double the price, people will often buy more of it. They assume the high price means it must have better stuff inside or that it'll work wonders on their skin. It creates a loop where raising the price makes the product look better to someone who's confused or just starting out.

HostBut that feels like a trick. Are companies just hiking prices because they know we're too lazy to do the research?

GuestIt's less about being lazy and more about how we handle risk. If you're buying something important, like medicine, you don't want to take a chance on the cheap stuff. Even if the cheap pill has the same exact ingredients as the expensive one, that high price acts as a promise of safety to our brains. We would rather pay more than worry that we bought something low-grade.

HostOkay, that makes sense for luxury or things we don't understand. But does this ever happen with the basics? Like things we need just to get through the day?

GuestThis is the most surprising part, and it's actually quite sad. There's a very rare case called a Giffen good. This happens when very poor people rely on one basic food to survive, like rice or potatoes. Imagine a family that spends almost all their money on rice and just a tiny bit on a small piece of meat for a treat. If the price of rice goes up, they can no longer afford that bit of meat at all. But they still have to eat enough calories to stay alive. So, what do they do? They spend every last cent they have on even more rice. The price of the basic food went up, and because it pushed everything else out of reach, they ended up buying more of it just to survive. It's a total break from how we expect the world to work.

HostThat's a tough spot to be in. It's like the price hike traps them into eating more of the very thing that's getting expensive.

GuestIt really is a trap. On the other side of things, modern brands use price to create a different kind of trap—one that people want to be in. They use high prices to create a sense of being in a special club. You see this a lot with limited-edition sneakers or high-end clothes. By keeping the price high and making sure there are only a few items for sale, the brand builds a fence around the product. This is artificial scarcity. The price acts as a filter. It ensures the item stays exclusive and rare. If everyone could afford it, that special feeling would vanish. You're not really paying for the leather or the stitching at that point. You're paying for the right to be one of the few people who owns it. It's about belonging to a top group.

HostBut if a shop keeps people out with a fence like that, wouldn't they eventually run out of buyers?

GuestNot if they keep the dream alive. For those buyers, the value is the fence itself. They want the item because it's hard to get. It's not about what the object does; it's about what the object says about the person holding it. We're not just buying tools or fuel; we're buying a way to tell the world who we are.

HostThe next time I see a bottle of wine with a huge price tag, I'm going to wonder if I'm tasting the grapes or just the number on the sticker.

GuestThose pleasure centers in the brain are very good at listening to the price tag instead of the tongue.

HostIt's wild that the cost of a thing can actually change our physical world, from how a drink tastes to how we survive a hard week.