Monday, March 19, 2012

Chinese Numerology May Cost Consumers 1.4% "Surcharge"

From PhysOrg:
Chinese consumers pay too much for goods and services because of superstitions surrounding particular numbers, Binghamton University economist Zili Yang says.

In a study published recently by The Journal of Socio-Economics, Yang reports that an aversion to the number 4, combined with a for the numbers 6 and 8, may translate into a “surcharge” of as much as 1.4 percent of China’s gross domestic product.

In China, the world’s second-largest economy, superstition plays an important role in the pricing of consumer goods. The number 4 shares the same sound as “death” in Chinese; 6 is a lucky number that represents “smooth”; and the number 8 sounds like the word “prosperity” in Chinese.

It’s not uncommon for a culture to have such preferences, Yang notes: Consider Americans’ aversion to the number 13. The difference is that the Chinese superstition has significant economic implications.

Yang, who grew up in China and travels there several times a year, had made casual observations about the effect of these superstitions in the past. When he set out to test his theory, he hired someone to collect random prices from Chinese shops without telling him what kind of research he was doing. In the end, Yang analyzed more than 11,000 Beijing-area prices of items in five categories: food, electronics and appliances, clothing, real estate and services.

“Through meticulous analysis of the collected data, I conclude that retailers in China could have gained as much as an extra 4.16 percent by manipulating price tag numbers to take advantage of superstitions,” he writes, “which could translate into as much as 1.40 percent of annual GDP in 2007, where these retailer gains are consumer losses.” ...MORE