Do high prices lead to higher expectations?

July 30 2018
If you pay more for something, you generally expect it to perform better. So, a high-priced aspirin should cure your headache faster, right? This is called the placebo effect. But a high-priced drug that has known side effects may also lead people to anticipate stronger side effects. This is called the nocebo effect.

The quantitative research that explores these behaviors adds critical insights to academia and business. The way we make decisions about a purchase or a brand spans all industries.

I’ll be presenting my findings on this topic at the upcoming conference Ignite 2018—Protecting Trust in Today’s Consumer Journey. The conference will be held September 20 at the University of Minnesota’s Carlson School of Management. Each session pairs a corporate leader with a research scholar, with the goal of connecting academic findings with real-world results.

The research I do at the Carlson School is focused on consumer behavior. Right now, I’m conducting a research study that examines the underlying mechanisms driving placebo and nocebo effects in health care. I’m looking at why these behaviors occur in some instances and not in others. To date, my research has shown that the level of trust a patient has for a doctor or even an insurance company can directly impact these perceptions.


Trust, placebos, and nocebos

As the study enters its second year, I anticipate that the next wave of data collection will make it possible for a paper to be published in the next year or two. As we move along this inquiry, we plan to examine the underlying neural mechanisms that account for the role of trust in placebo and nocebo effects, by using fMRI techniques on human subjects exposed to simulated scenarios.

Particularly in the healthcare space, we find that trust is built from two components: benevolence and competence. In other words, does that doctor have my best interests at heart and does the doctor know what s/he is doing? The research I’m doing examines this issue within the context of pricing. This parsing of the dimensions of trust has obvious implications for the notion of brand trust – does the brand know what it is doing and does the brand have the best interests of the consumer. These issues are critical not just in health care, but in financial services –think Wells Fargo, or information technology –think Facebook and the entire concept of fake news.


Any Questions? Join the discussion on September 20, 2018

The 2018 Ignite conference is sponsored by YA, a comprehensive customer engagement agency based in Minneapolis MN and the Institute for Research in Marketing at the Carlson School. The event promises to offer robust information, lively discussion, and realistic solutions. I hope to see you there. To lock in your spot on September 20th, register here. Early bird pricing ends soon!

Ingnite Conference


Akshay Rao is a Professor, and General Mills Chair in Marketing at the Carlson School of Management

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