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Junk fees and drip pricing: the underhanded tactics we hate yet still fall for

<p><em><a href="https://theconversation.com/profiles/ralf-steinhauser-1459112">Ralf Steinhauser</a>, <a href="https://theconversation.com/institutions/australian-national-university-877">Australian National University</a></em></p> <p>You see a fantastic offer, like a hotel room. You decide to book. Then it turns out there is a service fee. Then a cleaning fee. Then a few other extra costs. By the time you pay the final price, it is no longer the fantastic offer you thought.</p> <p>Welcome to the world of drip pricing – the practice of advertising something at an attractive headline price and then, once you’ve committed to the purchase process, hitting you with unavoidable extra fees that are incrementally disclosed, or “dripped”.</p> <p>Drip pricing – a type of “junk fee” – is notorious in event and travel ticketing, and is creeping into other areas, such as movie tickets. My daughter, for example, was surprised to find her ticket to the Barbie movie had a “booking fee”, increasing the cost of her ticket by 13%.</p> <p>It seems like such an annoying trick that you may wonder why sellers do it. The reason is because it works, due to two fundamental cognitive biases: the way we value the present over the future; and the way we hate losses more than we love gains.</p> <h2>Present bias preference: why starting over feels too costly</h2> <p>In the case of booking that hotel room, you could abandon the transaction and look for something cheaper once the extra charges become apparent. But there’s a good chance you won’t, due to the effort and time involved.</p> <p>This is where the trap lies.</p> <p>Resistance to the idea of starting the search all over again is not simply a matter of laziness or indecision. There’s a profound psychological mechanism at play here, called a present-bias preference – that we value things immediately in front of us more than things more distant in the future.</p> <p>In their seminal 1999 paper, <a href="https://doi.org/10.1257/aer.89.1.103">Doing it now or later</a>, economists Mathew Rabin and Ted O'Donoghue define present-biased preference as “the human tendency to grab immediate rewards and to avoid immediate costs”.</p> <p>They give the example of choosing between doing seven hours of unpleasant activity on April 1 or eight hours two weeks later. If asked about this a few months beforehand, most people will choose the earlier option. “But come April 1, given the same choice, most of us are apt to put off work till April 15.”</p> <p>In simple terms, the inconvenience and effort of doing something “right now” often feels disproportionately large.</p> <p>Drip pricing exploits this cognitive bias by getting you to make a decision and commit to the transaction process. When you’re far into a complicated booking process and extra prices get added, starting all over again feels like a burden.</p> <p>Often enough, this means you’ll settle for the higher-priced hotel room.</p> <h2>Loss aversion: buying more expensive tickets</h2> <p>Beyond the challenge of starting over, there’s another subtle force at work when it comes to our spending decisions. Drip pricing doesn’t just capitalise on our desire for immediate rewards; it also plays on our innate fear of losing out.</p> <p>This second psychological phenomenon that drip pricing exploits is known as loss aversion – that we feel more pain from losing something than pleasure from gaining the same thing.</p> <p>The concept of loss aversion was first outlined by economists Daniel Kahneman and Amos Tversky in <a href="https://www.jstor.org/stable/1914185">a 1979 paper</a> that is the third most-cited article in economics.</p> <hr /> <figure class="align-center "><img src="https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=600&amp;h=497&amp;fit=crop&amp;dpr=1 600w, https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=600&amp;h=497&amp;fit=crop&amp;dpr=2 1200w, https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=600&amp;h=497&amp;fit=crop&amp;dpr=3 1800w, https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;h=624&amp;fit=crop&amp;dpr=1 754w, https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=754&amp;h=624&amp;fit=crop&amp;dpr=2 1508w, https://images.theconversation.com/files/543635/original/file-20230821-25-mca6ku.png?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=754&amp;h=624&amp;fit=crop&amp;dpr=3 2262w" alt="A graphic representation of loss aversion. The pain from losing a good or service will be greater than the pleasure from gaining the same good or service." /><figcaption><span class="caption">How economists Daniel Kahneman and Amos Tversky graphically represented loss aversion. The pain from losing a good or service is greater than the pleasure from gaining the same good or service.</span> <span class="attribution"><span class="source">Daniel Kahneman and Amos Tversky, Prospect Theory: An Analysis of Decision under Risk, Econometrica, Vol. 47, No. 2</span></span></figcaption></figure> <hr /> <p>Drip pricing exploits this tendency, by dragging us away from more “rational” choices.</p> <p>Imagine you’re booking tickets for a show. Initially attracted by the observed headline price, you are now presented with different seating categories. Seeing the “VIP” are within your budget, you decide to splurge.</p> <p>But then, during the checkout process, the drip of extra costs begins. You realise you could have opted for lower-category seats and stayed within your budget. But by this stage you’ve already changed your expectation and imagined yourself enjoying the show from those nice seats.</p> <p>Going back and booking cheaper seats will feel like a loss.</p> <h2>Do consumers need protection?</h2> <p>Empirical evidence supports the above theoretical predictions about the impact of drop pricing on consumers.</p> <p><a href="https://doi.org/10.1002/mar.21426">A 2020 study</a> quantified how much consumers dislike the lack of transparency in drip pricing (based on tracking the reactions of 225 undergraduates using fictional airline and hotel-booking websites). The authors liken the practice to the “taximeter effect” – the discomfort consumers feel watching costs accumulate.</p> <p>But drip pricing’s effectiveness from a seller’s perspective is undeniable. A <a href="https://doi.org/10.1016/j.jebo.2020.04.007">experimental study</a> published in 2020 found drip pricing generates higher profits while lowering the “consumer surplus” (the benefit derived from buying a product or service). A <a href="https://doi.org/10.1287/mksc.2020.1261">2021 analysis</a> of data from StubHub, a US website for reselling tickets, calculated drip pricing increased revenue by 20%.</p> <p>Which is why the tactic remains attractive to businesses despite customers disliking it.</p> <p>Buyers would benefit from a ban of drip pricing. Many countries are taking steps to protect consumers from drip pricing.</p> <p>The UK government, for example, announced a <a href="https://www.theguardian.com/business/2023/aug/21/growth-of-airlines-add-on-fees-sparks-calls-for-price-reforms">review of drip pricing</a> in June, with Prime Minister Rishi Sunak flagging the possibility of measures to curb the practice. The US government is also considering <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/15/president-biden-recognizes-actions-by-private-sector-ticketing-and-travel-companies-to-eliminate-hidden-junk-fees-and-provide-millions-of-customers-with-transparent-pricing/">new regulations</a>, with President Joe Biden denouncing “junk fees” in his <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/02/07/remarks-of-president-joe-biden-state-of-the-union-address-as-prepared-for-delivery/">2023 State of the Union address</a>. Proposed changes include requiring airlines and online booking services to disclose the full ticket price upfront, inclusive of baggage and other fees.</p> <p>The effectiveness of measures, however, is <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4430453">still being debated</a>.</p> <p>In the meantime, your principal protection is making a more informed decision, by understanding why the tactic works. Bargains may attract you, but you can learn to not fall for hidden costs and align your choices with your budget and values.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/211117/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em><a href="https://theconversation.com/profiles/ralf-steinhauser-1459112">Ralf Steinhauser</a>, Senior Research Fellow, <a href="https://theconversation.com/institutions/australian-national-university-877">Australian National University</a></em></p> <p><em>Image credits: Getty </em><em>Images </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/junk-fees-and-drip-pricing-the-underhanded-tactics-we-hate-yet-still-fall-for-211117">original article</a>.</em></p>

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Everything you need to know about vitamin drips

<p>Want to boost your immune system, reduce your physical signs of ageing, or cleanse your blood to get rid of toxins? Intravenous (IV) vitamin therapy, or vitamin drips, promise to help. Some claim they can even benefit serious conditions like cancer, Parkinson’s disease, the eye condition macular degeneration, the pain of fibromyalgia and depression.</p> <p><a href="https://www.refinery29.com/en-us/2018/03/192731/vitamin-iv-drip-side-effects-kendall-jenner-hospitalized">Celebrities</a> have promoted them on social media. The demand has led to <a href="https://www.theguardian.com/lifeandstyle/2019/mar/03/intravenous-vitamin-injection-goes-mainstream">alternative therapy lounges</a> popping up around the world, including in Australia. Patients can kick back in comfy leather chairs while they’re hooked up to IVs in the infusion lounge, watch Netflix and have some tea.</p> <p>But do they work? Or are you just paying for really expensive urine? Let’s look at what the science says.</p> <p><strong>What is IV vitamin therapy?</strong></p> <p>IV vitamin therapy administers vitamins and minerals directly into the bloodstream via a needle that goes directly into your vein. Fans of the therapy believe this enables you to obtain more nutrients as you avoid the digestion process.</p> <p>Providers of these injections say they customise the formula of vitamins and minerals depending on the perceived needs of the patient.</p> <p>Right now for example, many Australian lounges are offering drip “cocktails” containing immune boosting vitamins like vitamin C and zinc to help <a href="https://www.irefresh.com.au/">protect against the flu</a>. Other popular therapy sessions come under names like <a href="https://infusion.clinic/treatments">“Energy Cocktail”</a> and <a href="https://www.dripiv.com.au/services">“Glow”</a>. One vitamin IV therapy session can take 30-90 minutes and will cost between A$80 to $1,000.</p> <p><strong>Does IV vitamin therapy work?</strong></p> <p>IV therapy itself is not new and has been used in the medical profession for decades. In hospitals, it is commonly used to <a href="https://www.nice.org.uk/guidance/cg174">hydrate patients</a> and administer <a href="https://nutritionj.biomedcentral.com/articles/10.1186/1475-2891-2-18">essential nutrients</a> if there is an issue with gut absorption, or long-term difficulty eating or drinking due to surgery. Single nutrient deficiencies like vitamin B12 or iron are also often treated in hospital with infusions under medical supervision.</p> <p>But the “cocktails” IV vitamin therapy clinics create and administer are not supported by scientific evidence. There have been no clinical studies to show vitamin injections of this type offer any health benefit or are necessary for good health. In fact, there are very few studies that have looked at their effectiveness at all.</p> <p>There is <a href="http://www.altmedrev.com/archive/publications/7/5/389.pdf">one review</a> on the use of the “Myers’ cocktail” (a solution of magnesium, calcium, vitamin C and a number of B vitamins). But it just contains a collection of anecdotal evidence from singular case studies.</p> <p>Another <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2894814/">trial</a> looked into the effectiveness of IV vitamin therapy in reducing symptoms of 34 people with the the chronic pain condition fibromyalgia. It found no significant differences between those who received the “Myers’ cocktail” once a week for eight weeks and those who did not. In fact, the authors noted a strong placebo effect. In other words, many people said their symptoms improved when they were only injected with a “dummy” cocktail.</p> <p><a href="https://www.ncbi.nlm.nih.gov/pubmed/17515022">Another study</a> that examined IV vitamin use in fibromyalgia patients was missing a placebo group, involved just seven patients and showed only short-term improvement in symptoms. The only other published <a href="https://nutritionj.biomedcentral.com/articles/10.1186/1475-2891-3-6">study</a> examined IV vitamin therapy use for asthma. But that study was of even poorer quality.</p> <p><strong>What are the risks of IV vitamin therapy?</strong></p> <p>Even when it comes to vitamins and minerals, you can have too much of a good thing. For example, if you take in more of the fat soluble <a href="https://onlinelibrary-wiley-com.libraryproxy.griffith.edu.au/doi/abs/10.1002/lt.21007">vitamin A</a> than you need, your body stores it, risking <a href="https://www.ncbi.nlm.nih.gov/books/NBK234920/">damage</a> to major organs, like the liver.</p> <p>IV vitamin therapy “cocktails” also often contain significant levels of the water soluble vitamins C and B. These are processed by the kidneys and excreted into urine when the body cannot store any more. This makes for some very expensive urine.</p> <p>There is also the risk of infection with IV vitamin therapy. Any time you have an IV line inserted, it creates a direct path into your bloodstream and bypasses your skin’s defence mechanism against bacteria.</p> <p>People with certain conditions like <a href="https://www.tandfonline.com/doi/full/10.3109/0886022X.2014.882714">kidney disease or renal failure</a> shouldn’t have IV vitamin therapy because they cannot quickly remove certain minerals from the body. For these people, adding too much <a href="https://onlinelibrary.wiley.com/doi/abs/10.1046/j.1525-139X.2001.00087.x?casa_token=Q5YupqqGg5gAAAAA:raHNHEk0AHDe45EvVsC3MnNjfxlFqoCoJL8QijrwJLQW5MLCERDly2g_krTTYjMNvreuQuzya211">potassium</a> could lead to a heart attack.</p> <p>People with heart, kidney or blood pressure conditions should also avoid IV vitamin therapy as there is risk of <a href="https://www.ahajournals.org/doi/10.1161/CIRCHEARTFAILURE.115.002922">fluid overload</a> without consistent monitoring. The <a href="https://bmcnephrol.biomedcentral.com/articles/10.1186/s12882-016-0323-6">consequences</a>of fluid overload in these patients can include heart failure, delayed wound healing, and impaired bowel function.</p> <p><strong>What’s the bottom line?</strong></p> <p>For most of us, the quantities of vitamins and minerals needed for good health can be obtained by eating a healthy diet with a wide range of foods and food groups. Obtaining vitamins and minerals from your diet is much easier, cheaper, and safer.</p> <p>Unless you have a medically diagnosed reason for getting a vitamin infusion and it was prescribed by your doctor, you are always better off obtaining vitamins and minerals through food.</p> <p><em>Written by Emily Burch. Republished with permission of </em><a href="https://theconversation.com/do-vitamin-drips-really-work-the-evidence-says-no-so-save-your-money-and-eat-real-food-116823"><em>The Conversation</em></a><em>.</em></p>

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