Title: Zero price effect - Market
Headings: Zero price effect
Zero price effect
Contents
Definition
Explanations
Very low marginal utility
Transaction costs
Psychic costs

Content: Transaction costs
Another related explanation is that if the purchase of a good or service involves the exchange of money, the exchange of money itself imposes transaction costs that have a minimum value. For instance, when buying something online, a person may need to give credit card information or log in through a payment service. When buying something in person, an exchange of coins or bank notes may be necessary. These direct and indirect costs put a positive floor on the effective price in case of any nonzero price, and hence an actual price drop to zero may represent a significant drop in the effective price. This problem of transaction costs can be alleviated in many ways -- for instance, by using cards or accounts where bulk payments are made once and then an account balance is maintained that keeps track of small purchases. This is the way electricity, phone usage, and other utilities are billed for. Psychic costs
Dealing with and thinking about money can be stressful. Thinking about whether a small item is worth a small amount of money may itself impose psychic costs which may make people avoid thinking about and making purchases. Retrieved from " https://market.subwiki.org/w/index.php?title=Zero_price_effect&oldid=426 "