Cost of Medicine == Perceived Value

The Freakonomics blog has a fascinating blurb about a study on the placebo effect (by the way, this blog is really good most days if you like econ and/or understanding why people make the decisions they do . If you like that sort of thing, check it out).

NYTimes: More Expensive Placebos Bring More Relief

From the article:

The subjects were given an initial series of electric shocks and asked to rate the pain they felt after each shock. The subjects were then allowed to take a placebo pill that they were told was similar to codeine. In fact, the pill had no direct medical benefit at all. While half of the patients were told that their (false) treatment cost $2.50 per pill, the other half were told that their pill had been discounted to $0.10 per pill. They were then given a second series of electric shocks, and once again, asked about how much it hurt.

While 85 percent of the patients taking the $2.50 pill reported that the second set of shocks were less painful, only 61 percent of those taking the (identical!) $0.10 pill reported the shocks to be less painful. So the more expensive the pill, it seems, the larger its perceived effect — even when the pill actually has no medical effect!

Just goes to show how much the "you get what you pay for" mentality is ingrained in us.