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What is the cat string theory?

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Quick Answer

The cat string theory refers to a marketing concept called the law of scarcity; marketers entice buyers with statements like "supplies are limited" and "this offer expires on a set date." The concept is designed to enhance the value of a product or service based on its scarcity.

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What is the cat string theory?
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Full Answer

Dangle a string just out of reach of a cat, and the cat continues to reach for it. Once the cat gets the string it its paws, it loses interest and the value has been diminished. The theory is also referred to as deliberate withdrawal and is predicated on cognitive biases and local fallacies. In other words, a person pursues that which retreats from him.

In the world of business, the concept is related to supply and demand. When limited supply is combined with high demand, there is a lack of pricing equilibrium. When pricing is stable, supply and demand are balanced. When demand exceed supply, prices rise. When supply exceeds demand, prices drop.

The concept of the cat string theory applies to nearly all aspects of society, from buying or selling a home to investing in stocks. When there are lots of homes in a price range on the market, supply is high and it is hard to sell an attractive price. When there is only one home in a price range on the market, supply is limited and the seller can set his own price.

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