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I recently saw this Ted talk by Esther Duflo, and in it Duflo tells of how she tackled the question in the title head on, in the context of health and disease prevention.

I would like to know what other research has been done to answer the question: how do people value commodities, if given for free?

The question might have different answers to different kinds of commodities, which makes it all the more interesting, but not more ambiguous.

Note that in Duflo's research, for example, the question of how to define value is clear and totally unambiguous: did people use the bed nets that they got for free, a year after getting them.

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  • $\begingroup$ Ok, so I think you might be asking this question, which has three parts: (i) when, and (ii) why, do people undervalue free stuff, and (iii) does the valuation differ based on the commodity involved? If not, what do you suggest should change in the suggested question I have outlined? $\endgroup$ – Peter Slattery Dec 14 '15 at 2:15
  • $\begingroup$ I think I expected a different kind of answer than what you're proposing, maybe because I'm used to a very different approach on another stackexchange. A list (possibly of size 1) describing results of studies, where people were given something for free and then later evaluated on their evaluation, would really answer my question, and I don't think I'll be satisfied with anything less. Such a list would give answers to your (i) and (iii). Giving reasons why these are the results, whether your own thinking or backed by literature, would be a bonus. $\endgroup$ – Dror Speiser Dec 14 '15 at 2:30
  • $\begingroup$ I would add that things that we recieve or acquire are given value by us as individuals, and thus we decide whether or not an object is meaningful to us. If we are unaware of something's value to us, THE TRUE VALUE, say food, or water, some thing whose significance has been largely taken for granted, or even lost (a lot of people don't know what FOOD is(energy & nutriment), my brother thought a noodle was just a naturally occuring substance, it is of course derivitive of wheat, but he didn't realize that somewhere out there there wasn't a noodle tree sprouting these things), then the thing los $\endgroup$ – Oliver Bolz Jan 29 '17 at 17:05
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Do people (under)value free stuff?

As you have mentioned, value can be conceptualized to mean different things. For the purposes of this answer lets just assume that value is measured by whether individuals are equally likely to use/chose free stuff as paid stuff - in line with the Ted talk by Esther Duflo.

Based on this assumption, I reviewed the literature and some competing narratives emerged.

First, research suggests that people actually value (i.e., choose/use) free things more than they should given the products utility - the so called zero price effect. As {1} state:

People appear to act as if zero pricing of a good not only decreases its cost but also adds to its benefits.

They give this example:

When Ben and Jerry’s offer free ice-cream cones, or Starbucks offers free coffee, many people spend hours in line waiting to get the free item, which they could buy on a different day for two to three dollars. At first glance, it might not be surprising that the demand for a good is very high when the price is very low (zero), but the extent of the effect is intuitively too large to be explained by this simple economic argument.

There is a lot of additional research on this "zero price effect" which you can check out if you want (see here).

Second, research also suggests people use prices as a signals for value, and therefore will value things more highly if they are (i) more expensive or costly to procure, or (ii) more scarce. For instance in {2} Cialdini talks about how you can sometimes get people to buy more of a product by increasing the price. Additionally, some research suggests that people value things more as they invest more effort/money {3,4}. Additionally, in {2} Cialdini discusses how people generally value scarce things more highly, and things that are free, are less scarce, it appears to follow that they are not likely to be as highly valued as items one must pay for.

Third, research in developmental economics suggests that people will value products equally much when they are free/paid for. This research {e.g., 5} suggests that peoples usages of mosquito nets is not significantly, influenced by the amount of money they have to pay for them - that people are approximately as likely to use nets they got for free, and those they paid for.

I hope, that this is helpful, even if this isn't a definitive, or comprehensive answer.

References:

{1} Shampanier, K., et al. (2007). "Zero as a special price: The true value of free products." Marketing Science 26(6): 742-757.

[2] Cialdini, R. B. (2009) Influence: science and practice , 5 ed., Boston, Massachusetts: Pearson.

[3] Norton, M. I., Mochon, D. and Ariely, D. (2012) 'The IKEA effect: When labor leads to love', Journal of Consumer Psychology, 22, 453-460.

[4] Thomas, M., et al. (2004). When Do Higher Prices Increase Demand? The Dual Role of Price in Consumers’ Value Judgments.

[5] Hoffmann, V., et al. (2009). "Do Free Goods Stick to Poor Households? Experimental Evidence on Insecticide Treated Bednets." World Development 37(3): 607-617.

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  • $\begingroup$ Thanks for getting back to me. I will update this a little to make it a better answer then. $\endgroup$ – Peter Slattery Dec 14 '15 at 1:13
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    $\begingroup$ Ok, I will come back to this later this week and expand my answer then - I had a another read of the literature, and I need some time to process it and prepare an update. I think it is a very interesting question which is one reason why I don't mind taking some time to try to take some time to answer it. $\endgroup$ – Peter Slattery Dec 14 '15 at 2:17
  • $\begingroup$ Ok, I have updated the answer. $\endgroup$ – Peter Slattery Dec 16 '15 at 1:17
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Based on my limited perspectives on this problem, let me try to answer this one. I think, valuing free stuff has got something to do with one's evaluation of self-worth while dealing with free stuff

1) People value free stuff, Ex: when it comes along with another commodity, like a 1 + 1 free trouser. They feel like they have earned it smartly

2) People value free stuff, when it comes as a recognition of their self-worth, like a gift from someone who admires you

3) People value free stuff, when it comes as part of an extra bonus reward for your effort in a project

People do not value free stuff if:

1) It comes as a manipulative gift: Ex A bribe to expect undue favors from you

2) It comes as a way to suppress your will and wish, Ex force you to do something against your will, going to a restaurant you don't like, while your friend pays the bills

3) things which underestimate your creativity and self expression. Ex: Someone paying for your music lessons when you are totally not interested in music

My ideas on this problem are based on my readings about Intrinsic Motivation.

Would love to see a more holistic treatment of the problem.

Reference Books:

Drive: The Surprising Truth About What Motivates Us by Daniel H. Pink

The art of thinking clearly by Rolf Dobeli

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