Topics Business

Question Some businesses use incentive schemes to draw in customers; I want to know about whether or not such schemes abuse human psychology or are otherwise immoral. Let me give an example. Imagine a sandwich shop that sells sandwiches for 2$ each; they decide to change the scheme, so that now, every time one buys four sandwiches, the fifth sandwich comes free of charge. To compensate, they raise the price of the sandwiches to 2,50$, meaning that either way, the customers end up paying 10$ for every five sandwiches. Yet people, especially newcomers to the shop unfamiliar with the old prices, buy more sandwiches than before because, hey, there's a free sandwich in there! The shop begins to earn more than its competitors, and garners more long-term customers who pay more of their money for the sandwiches, by exploiting a loophole in human psychology. The sandwiches are in all relevant respects identical, yet people are paying more because of a freebie scheme. Is this an ethically legitimate practice? Or is it exploitative in some way?

Accepted:
May 12, 2011

Comments

Great case! It is difficult to say (or say clearly) that the practice is unethical for, after all, the competition could offer a similar scheme. Any number of practices seem ethically permissible that would give the shop an edge, e.g. the opportunistic shop owner might offer customers who buy four sandwiches a flower or give $2.50 to charity, and so on. But there is some kind of exploitation insofar as the shop is taking advantage of costumers not knowing the past practice (and so not realizing that they are not getting an advantage over other competitors), plus the shop might have to spend more money to expand the size of the shop insofar as their customers start getting larger and larger from eating all those bloody sandwiches! Apart from perhaps placing customers at some health risk from consuming massive numbers of sandwiches, it does not appear (to me) to involve immoral or unethical action.