The Why Axis: Hidden Motives and The Undiscovered Economics of Everyday Life

by Uri Gneezy

A famous example of this pricing is from the British band Radiohead. In 2007, the band released a CD as a digital download. It encouraged fans to log on to its website and download the album for any price they chose. Fans could get the album for free or pay as little as 65 cents (the cost of handling by the credit card company) or more. But would the fans pay for something they could get for free? And did they pay? Interestingly, hundreds of thousands of people downloaded the album from the band’s website, and many of them (around 50 percent) paid something for the CD. (By the way, as our friend, the recent Nobelist Al Roth likes to say, “Columbus wasn’t the first to discover America; he was the last.” After Columbus, everyone knew about the “new” continent. The same is true here. Radiohead wasn’t the first to discover this pricing strategy, but the group is famous enough to be the “last”—no one will ever need to “rediscover” it.)