The role of social norms in zero price effects

Abstract

A zero price effect is a discontinuous change in demand when price is reduced to zero from a level arbitrarily close to it. It has been proposed that social norms play a role in zero price effects on consumption. We first conducted a norm-elicitation experiment to measure how people perceive the social appropriateness of consumption under zero versus minimal prices. We then ran a natural field experiment in the same contexts to observe actual taking behavior. Results show that the social appropriateness of consuming high quantities is significantly lower when goods are offered for free than when they are sold at 1 cent. Zero pricing increases the proportion of individuals who consume something, but reduces the average amount taken by those who consume positive amounts. Overall, the evidence suggests that high consumption of free goods is prevented by its social inappropriateness, potentially helping to explain the inconsistent evidence on the direction of zero price effects in previous studies.