OPINION21 April 2016

Testing significance

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Behavioural economics Impact Opinion UK

Making a proper business decision can often mean trying a ‘slightly wrong' option, rather than a ‘boringly right’ one, argues Rory Sutherland. 

Menu crop

If you were to ask me what is the most valuable thing I have done in my working life, I think the answer’s quite easy. I once asked a client in the restaurant trade what they did when an item on the menu wasn’t selling very well.

“We drop the price, ” they replied.

“Good idea. But do you try raising the price first?”


“Go on, try it occasionally.”

They did. The first time they took my advice, demand went up. A lot.

To be honest, I was lucky. The tenets of mainstream economics are mostly correct in that increasing the price of something will depress demand, but it’s not an iron-clad rule. For instance, when people choose from a menu, the usual price-demand relationship is weakened. Some hungry diners may be disposed to buy pricier items. Also, since restaurant visits are often seen as a guilty treat, there may be a disposition not to skimp.

Being boringly ...