Why do we choose to pay more?

Posted by Alexander Ginzburg on September 28, 2007
Filed Under Advertising |

Previously I’ve claimed that advertising is an expensive and unfair way to pay for information. Nevertheless, it’s still a very popular currency that is constantly being used in order to acquire various types of content. The explanation to this situation is the absence of choice. Consumers are compelled to pay for advertisements while purchasing products. From that point and on, this costs can’t be refunded, which makes it “sunk costs” in economic terms. The meaning of “sunk cost” is that it is irrelevant to the decision making process, since the cost would be carried, no matter how the person would act. Consequently, at the time of decision whether to consume information financed by products’ advertising or to pay for it directly, the choice is obviously in favor of advertisements since they have been already paid for. Therefore, we don’t choose to pay more but we are forced to.