What is the scarcity principle?

According to the scarcity principle, the price of a good, which has low supply and high demand, rises to meet the expected demand. Marketers often use the principle to create artificial scarcity for a given product or good—and make it exclusive—in order to generate demand for it. The scarcity principle is related to pricing theory.

Do social psychology principles work with scarcity?

There are two social psychology principles that work with scarcity that increase its powerful force. One is social proof. This is a contributing factor to the effectiveness of scarcity because if a product is sold out, or inventory is extremely low, humans interpret that to mean the product must be good since everyone else appears to be buying it.

How do marketers use the scarcity principle?

Marketers often use the principle to create artificial scarcity for a given product or good—and make it exclusive—in order to generate demand for it. The scarcity principle is related to pricing theory. According to the scarcity principle, the price for a scarce good should rise until an equilibrium is reached between supply and demand.