“The Price is Right” contestants have got a lot worse at guessing prices. This may be down to economic changes
Americans have sat through more than 9,000 episodes of “The Price is Right”, a game show with an economic twist. After being summoned from the audience by the famous catchphrase—“come on down”—contestants must guess the exact price of prizes, ranging from guitars to garden furniture. If they bid too high, they are disqualified. In a recent paper Jonathan Hartley of Harvard’s Kennedy School points out an interesting trend. Contestants have got a lot worse at guessing prices .
Technology may play a role. Reaching for a smartphone is easier than recalling a fact from memory. Who remembers phone numbers anymore? People may just fall out of the habit of recalling prices. Still, the rise of the smartphone is a recent phenomenon—it cannot explain why contestants became worse guessers during the 1970s, 1980s and 1990s.growth raised “price-recall error”.
Perhaps the most intriguing explanation, however, relates to globalisation. In the early 1970s consumers had a relatively limited selection of products to choose from. Around the time that “The Price is Right” first aired, Sears catalogues were hundreds of pages long. But a search on Amazon brings up nearly 1,000 results just for the word “toaster”. Firms offer a huge range of differentiated products at wildly different prices, allowing consumers to satisfy their peculiar wants.
The rise of online shopping adds further confusion. Online retailers use algorithms to respond instantly to fluctuations in supply and demand. Alberto Cavallo of Harvard Business School finds that some large retailers now change their prices, both upwards and downwards, twice as frequently as they did a decade ago. All of which suggests that contestants’ guesses may yet get worse.
This article appeared in the United States section of the print edition under the headline "The price is wrong"
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