Alchemy: The Surprising Power of Ideas That Don't Make Sense

by Rory Sutherland

The following is a perfect illustration of the tendency of modern business to pretend that economics is true, even when it isn’t. London’s West End theatres often send out emails to people who have attended their productions in the past, to encourage them to book tickets, and it was the job of an acquaintance of mine who worked as a marketing executive for a theatre company to send out these emails. Over time, she learned something that defied conventional economic rules; it seemed that if you sent out an email promoting a play or musical, you sold fewer tickets if you included an offer for reduced-price tickets with the email. Conversely, offering tickets at the full price seemed to increase demand. According to economic theory, this makes no sense at all, but in the real world it is perfectly plausible. After all, any theatre selling tickets at a discount clearly has plenty to spare, and from this it might be reasonable to infer that the entertainment on offer isn’t all that good. No one wants to spend £100–£200 on tickets, a meal, car-parking and babysitting, only to find that you would have had more fun watching television at home; in avoiding discounted theatre tickets, people are not being silly – they are showing a high degree of second-order social intelligence. Despite my friend’s discovery, her colleagues continued to demand that she discount tickets. She patiently explained to them that any discount would reduce the demand, so that they would end up selling fewe...