Artificial scarcity
Artificial scarcity is scarcity of items despite the technology for production or the sufficient capacity for sharing. The most common causes are monopoly pricing structures, such as those enabled by laws that restrict competition or by high fixed costs in a particular marketplace. The inefficiency associated with artificial scarcity is formally known as a deadweight loss.
Artificial scarcity is the deliberate restriction of supply, even when production is possible, to influence demand, create a sense of exclusivity, and drive up prices. It is a business and marketing strategy used to maximize profits and is different from natural scarcity, which is based on the limited availability of a resource. Examples include luxury brands limiting production of their products and limited-time online sales that use urgency to encourage purchases.
How it works
- Limited production: Companies intentionally produce fewer units of a product than they could, making it seem more exclusive and desirable.
- Sense of urgency: Marketing tactics create pressure to buy quickly, such as limited-time offers, countdown timers, and phrases like “only a few left”.
- Perceived value: The scarcity principle suggests that people tend to value things more when they believe they are in short supply, which can make the product seem more valuable.
Examples
- Luxury goods: High-end brands release limited-edition items, like a specific handbag or watch, to maintain high prices and a sense of prestige.
- Digital goods: Some cryptocurrencies use artificial scarcity to create value by limiting the total supply.
- Marketing: Online retailers use “while supplies last” promotions or flash sales to encourage immediate purchases.
- Intellectual property: Laws like patents and copyrights restrict the sharing of products or information even when technology would allow for easy distribution.
AI responses may include mistakes.
[1] https://www.promarket.org/2025/06/09/how-corporations-can-block-abundance/
[2] https://www.isu.edu/cob/blog/articles/no-sales-no-problem-how-luxury-brands-keep-their-prestige.html
[4] https://gradingforgrowth.com/p/artificial-scarcity
[5] https://thebootstrappedfounder.com/artificial-scarcity-damages-the-creator-economy/
[9] https://www.investopedia.com/terms/s/scarcity-principle.asp