Final answer:
The company offering discounted foreign language lesson sets is hoping that consumers will be influenced by the sunk cost fallacy, where they continue to use the lessons due to the money already spent, even if they might not fully benefit from or enjoy them. The correct answer to the student's question is b) a sunk cost fallacy.
Step-by-step explanation:
The question being addressed concerns a behavioral economic principle that a company hopes its consumers will exhibit when presenting a cost-saving deal on foreign language lesson sets. In the scenario provided, the company sells individual sets for $199 but offers a significant discount if all five sets are purchased upfront at $499. This sizeable discount is almost 50% off the total price of buying each set individually.
By offering this deal, the company anticipates that consumers will be influenced by the sunk cost fallacy. The sunk cost fallacy occurs when individuals continue a behavior or endeavor as a result of previously invested resources (time, money, or effort), even if they no longer want to continue because they feel the need to 'get their money's worth.'
To illustrate this, consider the case of Selena, who pays $8 for a movie ticket but realizes 30 minutes into the movie that it is terrible. Despite this, she might feel the need to stay for the entire movie due to the sunk cost fallacy, valuing the $8 ticket over the alternative of doing something more enjoyable with her time. This concept could apply similarly to consumers who purchase all five lesson sets; having spent $499, they may feel more compelled to utilize the lessons fully, even if they find the lessons are not meeting their expectations. The correct answer to the student's question is b) a sunk cost fallacy.