Imagine that you and a colleague finish a big project at work, so your boss orders a carrot cake and a box of brownies to celebrate. You go to make a coffee, only to find when you return that your colleague has eaten all of the carrot cake and left you a few of the brownies.

Technically, you still get plenty – and brownies are one of your favourites. Focus on payoff alone, and this is still a good outcome: brownies are far better than nothing.

In reality, most of us would feel furious, tell people the story about our terrible colleague for weeks, and refuse to eat the brownies out of spite. This is the logic behind something called the ultimatum game. We reject offers that we think are unfair, even if doing so leaves everyone worse off.

The Decision Lab sets the game out like this:

• Imagine two players. Player 1 is given $100 and has the power to decide how to split it with Player 2

• Player 2 can either accept the offer, or reject it.

• If they reject it, both players get nothing

Now, traditional economic theory predicts that Player 1 should offer the smallest amount possible (say $1). Player 2 should accept this, because $1 is better than the $0 they will receive if they reject it. But in real life experiments, this is absolutely not how things play out.

In one 2003 study, Player 1s typically offered between 30-50 per cent of the total pot – instead of the bare minimum. Player 2s were not happy with whatever they could get, and tended to reject anything lower than 20-25 per cent.

This is one of those cases where economic models struggle to describe the world as we actually experience it. People obviously care about dignity, revenge and fairness – and it feels obscure to try to pretend otherwise.

In another version, the dictator game, Player 2 has none of the same power:

• Player 1 is given $100 and has the power to decide how to split it with Player 2

• Player 2 cannot reject the offer

• Whatever Player 1 proposes is automatically accepted

You might expect Player 1 to keep the whole pot in this scenario – after all, Player 2 cannot complain. But in experiments, most dictators still gave away something, offering around 30 per cent of the total pot. When offering, as well as accepting, we are influenced by something more than material self-interest: fairness, generosity and social norms (some people would die of embarrassment if they tried to offer nothing) all matter, too.

The dictator game shows again that people do not always behave as traditional economics predicts – but in some situations, sometimes we should behave in the slightly unnatural way that some economists expect us to. If you can’t punish unfairness, rejecting a bad offer achieves nothing. In these situations, accepting that it is ‘better than nothing’ really might be the best response.

Over the past five years, prices in general have risen by about 26 per cent in the UK. In other words, a basket of things that would have cost £100 in 2021 would now set you back £126. Among these items, there are some prices that we really notice:

• A pint of milk: 42p to 65p (up 55 per cent)

• A pint of draught lager: £3.87 to £4.83 (up 25 per cent)

• A first class stamp: 85p to £1.80 (up 112 per cent)

Since the end of the pandemic, the cost of sending a letter by first class post has more than doubled. No wonder people are so indignant.

In many situations, paying for stamps has started to feel extortionate: why pay to post Christmas cards to local friends that you will probably see in person? But given that a first class stamp promises next working day delivery to any address in the UK, it can sometimes offer far better value for money. If you are posting a letter from St Ives to Inverness, that £1.80 looks like a bargain.

The market hinges on this kind of ‘cross subsidisation’. For some people, especially in urban areas where delivery works out cheaper, the price of a stamp can exceed the cost of delivering their letter. This ‘surplus’ can help to fund longer and more expensive rural routes. Royal Mail has to set a price that works across all of them.

This is easier said than done. Letter volumes have collapsed from 20bn in 2004/5 to under 7bn today, without a corresponding fall in costs. Delivering letters has high fixed costs: even on a quiet day, vans still have to run and sorting offices remain open. These costs now have to be spread across far fewer letters – and that means more expensive stamps.

First class stamp buyers also reveal themselves as being in a hurry – and therefore less sensitive to price. If your letter is urgent, the cost of postage is unlikely to change your mind. This is especially true because we spend so little on postage now overall. The average household spends about 60p a week on postal services – 0.1 per cent of total weekly spending. Even though stamp prices have risen sharply, the impact on most household budgets is tiny.

Second-class stamps also offer a slower, cheaper alternative: about 90 per cent arrive in three days. Their price has risen from 65p to 91p over the same period (‘only’ a 40 per cent increase). But because second class prices are capped, first class stamps have had to shoulder more of the increases. The gap between the two prices is widening.

But this creates another problem. The more expensive first class stamps become, the less incentive people have to use them, especially when email and WhatsApp provide instant communication for free. As fewer people send letters, the fixed costs of delivery has to be spread across an ever-smaller number of items. This pushes prices up further, and even more people abandon the post. A volume problem becomes a price problem which becomes an even bigger volume problem – and the spiral continues.

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But instead of being delighted that you got the bag you wanted for the price you offered, you feel sick. When the seller agreed so readily, your stomach dropped: clearly bag can’t be as good as you thought it was.

This paradox is known as the ‘winner’s curse’. When someone is happy to accept our offer, we start to wonder whether we overpaid or missed some kind of crucial drawback. After all, the fact that the other side is willing to give up implies that there must be something less desirable about the thing that we want.

We are prone to suffering the ‘winner’s curse’ when we bid for things, too. Another example is to imagine a jar of coins, auctioned off to the highest bidder. There is no way of knowing the value of the jar for sure – but the closest guess won’t win, the highest value will. A rush of elation gives way to a queasy feeling as the winner realises that they have probably overpaid.

Luckily for us, academics at Harvard Law School have come up with a list of tips that can help us to avoid the winner’s curse:

• Think about why you want the item. Does it have the same value to everyone (e.g. a jar of coins?) or is it especially valuable to you (e.g. the perfect bag?). If it is the former, tread more carefully

• Pay attention to other bidders. If people with more experience are holding back, they might know something you don’t

• Before each bid, ask yourself if you would be happy if you won at that price (EBay fanatics, take note)

Sporting victory

You can see the winners curse in action when countries bid to host sporting mega-events. Economists know that hosting the World Cup is usually a bad deal (read more below), and countries find that elation at winning a bid can rapidly give way to troubling thoughts about why no one else wanted to…

After Kuala Lumpur, Cardiff, Calgary, Edmonton and Adelaide dropped out of the race to host the 2026 Commonwealth Games, the Australian state of Victoria was left holding the trophy. It tried to hand it back a year later, when projected costs reportedly jumped from $2.6bn to over $6bn. Glasgow has since stepped in with a pared-back version. Having hosted the games in 2014, it has the stadiums, hotels and infrastructure in place – and a realistic idea of the bill.

The organisation was founded by five countries in the 1960s. By the 1970s, it had gained a wave of new members, and had an 85 per cent share of the global oil market. And with this market power came an incredible ability to bend oil prices to its will.

Opec members benefitted from the higher oil prices, but it also required a sacrifice on their side. They had to agree to hold back their own production – making less than they otherwise could have done. This looks a lot like a one-shot version of the Prisoner’s Dilemma.

Cooperate or betray?

Imagine two criminals being interrogated in separate rooms for breaking into a bank and stealing some diamonds (location now undisclosed). Each has the choice to remain silent or blame the other for the crime. If both stay silent, they can get away with a lighter sentence for breaking in – but not theft.

But this is risky: if you stay silent and your accomplice betrays you as the diamond thief, you will take the full punishment whilst they walk away free. No matter what your accomplice does, your best response is to betray them: you have a shot at no jail time, whereas cooperation guarantees at least a short sentence. Yet if you both do this, you both end up worse off than if you had stayed silent.

The incentives change if it is a repeated game, rather than a one-shot. If you knew that you would face the same situation with your accomplice again there is a very credible threat of a punishment for betraying them. In this situation, it can make sense to cooperate even though there is a very tempting immediate gain from defecting.

Why its so hard to keep the cartel together

This is the glue that held Opec together for years. Members agreed to limit production to push up oil prices, even though each had an incentive to produce more and cashing in on high revenues. The cost of producing oil, even for a high cost country like Nigeria, is around $30 a barrel – so when prices approach the $100 mark, the gains can be substantial.

But there are costs to cheating too – diplomatic pressures, and even conflict (Iraq accused Kuwait of exceeding quotas before its 1990 invasion). It was often worth short term restraint for the longer term benefit of being part of a group powerful enough to keep oil prices high.

But is its grip weakening? Opec now controls only around half of global oil supply. The US in particular has stepped up production, and Opec can no longer control prices like it once did. The UAE has decided to leave the organisation after almost 60 years – the draw of breaking quotas and producing more has finally proved too strong to resist.

The UAE has recently invested heavily in oil production, and leaving will allow it to get the most out of all that new productive capacity. Opec quotas limited the UAE’s production to around 3.5mn barrels a day, when its potential was closer to 5mn. With production costs of around $10 a barrel (Saudi even less than that, the US, closer to $23), that leaves a lot of money on the table. Even if oil prices halve, the UAE can comfortably profit from their extra production. After sixty years, the pull of those gains finally proved strong enough to break up the cartel.

The electric bike saves your legs but can get you the last mile home without a car. Netflix (as we now take for granted) lets you watch on demand, freed from the constraints of TV schedules or cinema listings. The helmet camera lets you record your journey to share with followers if it’s a scenic one; or it might help you to get justice if it’s a congested and hostile commute.

But if you rushed home on a Segway to watch a BetaMax wearing some Google Glass you would look completely insane.

Yet these failed experiments all offered a very similar promise to their mainstream counterparts: electric urban transport, at-home viewing, and the chance to capture video hands-free. Why do some new technologies become so widespread while others are doomed to fail?

Feeling unstable

Economists think a lot about the idea of equilibrium – a position that, once reached, won’t tend to change. We talk about it often in terms of markets for a particular good or service. If the price is too low, demand exceeds supply. Sellers notice the queues and empty shelves and realise they could charge more. Prices rise.

But if the price is too high, the opposite happens. Goods moulder on shelves, and sellers cut prices to coax buyers back. Eventually the market settles at a price where the amount that people want to buy and that businesses want to sell are in perfect balance. Supply and demand match, and prices stabilise unless given a jolt by an outside force. Economists call this the market ‘equilibrium’.

You can see examples all over economic life. Driving on the left side of the road, using QWERTY keyboards and shaking hands when you meet someone are only normal things to do because we (in the UK, at least) all do them. Since everyone has coordinated, deviating from the equilibrium would be dangerous or costly: don’t try driving on the right side of the road in London, or greeting a new colleague with a hug.

Poised to fail

New technologies arrive, poised like a boulder on the top of a hill. Balanced there, they are at a tipping point: a tiny push could send them rolling forwards into mass adoption, or backwards into obscurity. The direction of travel really matters. Once you reach either of these valleys, you settle into a stable equilibrium: moving back up the hill again would take an almighty shove.

Netflix was helped by being one of the first digital streamers. With few alternatives available, early adopters moved into it, and were rewarded when their subscriptions funded a bigger catalogue and clever recommendation systems.

Soon, a positive feedback loop formed. More subscribers meant more revenue for content and technology, which meant a better catalogue and recommendations… which meant even more subscribers. Economists call this a network effect: the more people use a technology, the more valuable it becomes. A fair wind had sent the boulder rolling down the hill into the valley of global streaming dominance. With over 300mn subscribers it is by far the most popular streaming service. Dislodging it will take a heroic effort.

But other innovations arrive at the top of the hill and start to roll the wrong way. Google Glass promised hands free navigation and video recording, but early adopters were called Glassholes for wearing them in socially unacceptable settings. They were banned in some restaurants and bars. The device never reached the critical mass it would have needed to make it ‘not creepy’, and production was stopped after a couple of years.

Something similar happened with Segways. The machine worked pretty well, but always struggled to work out where it belonged. It wasn’t clear if it was designed for the pavement, the road or cycle lanes. With no one else riding one, the stakes were uncomfortably high. Segways have settled into a very modest equilibrium of ‘occasionally used for novelty city tours’.

Then there is Betamax, one of the cruellest examples of an unstable equilibrium. Diehards still claim that it was technologically superior to the VHS, but even if they are right, it doesn’t matter. VHS tapes offered longer recording times (enough for a full movie) and this small advantage was enough. More customers bought VHS machines, video rental stores stocked more VHS tapes, and studios released more films on VHS. Before long, Betamax and VHS found themselves opposite sides of the hill: one basking in the sunlight of mainstream popularity, the other in obsolescence.

In markets with tipping points, it’s not the best product that takes off, but the one with the most momentum.

Around 40 per cent of professional footballers go bankrupt within five years of retirement – and retirement often happens remarkably young. The average playing career lasts just eight years, meaning many players finish in their thirties, just as they are most likely to be supporting children, too.

It is easy to have limited sympathy: footballers earn such extraordinary sums that you assume they must be set for life. But the real challenge is that they earn a huge income for only a short period. Economically, they are trying to finance perhaps fifty years of spending using just a decade of earnings. This is even harder if you have developed a taste for the finer things in life.

Analysts at the wealth management firm Cazenove Capital outlined a scenario that shows how easily the millions can disappear.

• Imagine a 34 year old footballer who gets a one year extension to his contract worth £3mn. He knows it will be his last.

• His family are used to his high earnings, and live a very nice lifestyle on £400,000 a year

• They have a big house with no mortgage, £5mn in cash, and some unorthodox investments like a share in a friend’s bar

But if the footballer carries on spending £400,000 while leaving the £5mn sitting in cash, it will be gone by his 47th birthday. Even cutting their spending dramatically to £150,000 a year wouldn’t solve the problem on its own. If he continued drawing on his savings, Cazenove estimates he would run out of money by 60 – leaving a lean retirement ahead.

If he cuts back to £150,000 a year and invests the savings in a portfolio earning 5 per cent on average, financial planners estimate that the pot could stretch until around age 80. It’s not glamorous, but the difference between lasting financial security and running out of money is decades of careful spending and investing.

This is still an enviable position to be in, but puts a footballer far closer to the world of ‘normal’ high earners: NHS consultants and headteachers can earn six figures over the course of a long career. The difference is that footballers compress most of their lifetime earnings into a single decade.

A retired footballer with £5 million in the bank can no longer afford to live like a Premier League player: the days of Rolexes and new Ferraris disappear brutally fast.

If a driver or a barista is brilliant at their job, they might get a compliment, a loyal following or – in the grimmest of workplaces – avoid getting fired. But they won’t make much extra money for their employer with their superb performance. Things might run more smoothly when they’re on shift, but the jump in revenues is usually modest.

With elite footballers, the sums are very different. A great player can materially improve a team’s chances of winning, and pull in fans with their sheer star power. Successful clubs make huge sums from broadcasting rights, sponsorship deals, merchandise and ticket sales. Last year, the figure for Real Madrid was over £1bn.

No wonder clubs compete for these rare stars, and make enormous bids to secure them. Estimates from five years ago showed the average Premier League footballer earned over £60,000 a week (the equivalent of £3mn a year). The figure is probably significantly higher today.

There are only a handful of Premier League superstars, but by Championship level, there is a far larger pool of capable replacements. Playing in the lower leagues still pays well by most standards, but there is a rapid drop off. By the time you reach League Two, avereage wages are more like a good professional salary (£140k a year if you’re lucky) than the multimillion pound pay packets of the Premier League.

Why do *male* footballers earn so much?

But these figures only apply if you’re a man. According to the player union Fifpro, around two thirds of women playing for national teams earn less than £15,000 a year, and a quarter do another job alongside football. Even in England’s highest tier (the Women’s Super League) salaries are only a fraction of those in the men’s Premier League, and far below even average pay in League Two.

The women’s game still generates far less revenue than the men’s. The top fifteen women’s teams brought in £140mn combined last year, with Arsenal Women leading at £20mn. This is nowhere near the commercial scale of Real Madrid. As a result, even the biggest stars cannot yet deliver the same financial returns for their teams – or command the same extraordinary wages.

But pretending that this is just a function of neutral market forces is a real cop out. Women’s football has faced huge barriers that the men’s game never had to contend with; not least being banned by the FA in the UK until 1971 for being “quite unsuitable for females”. The effects of the lost half century are inevitably felt today. Even now, Fifpro reports that female national players will probably fly to games in economy seats, and receive inadequate recovery time between matches. This isn’t the invisible hand of the market – this is the legacy of heavy handed restrictions.

When the women’s game was suppressed for decades, clubs could not build huge fanbases, secure massive TV rights deals or sell expensive merchandise. And players could hardly build on record-breaking salaries when, not that long ago, they weren’t even allowed to play professionally in the first place. As Dr. Laura Claus from the UCL School of Management argued, “more salary for athletes makes them more interesting to the public, evident from professional football players”. Sometimes the market follows the money, rather than the other way round.

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It was one of the highest grossing movies of all time, and joins a club of only seven films to have taken over $2mn at the box office. The others, you almost certainly will have heard of – Titanic, Avengers: Infinity War, Star Wars: The Force Awakens, Avatar: The Way of Water, Avengers: Endgame and Avatar.

You might spot a theme. With the exception of Titanic, they are all sequels or part of sprawling cinematic franchises. The one outlier is now almost thirty years old. When Titanic came out, Netflix was still a DVD rental company, and YouTube didn’t even exist. If you wanted to watch the latest film, there was no hope of streaming it from home: you had to go to the cinema.

Today, three quarters of US adults said that they watched a new movie on streaming instead of in the cinema at least once in the past year. Convenience and cost are big motivators – a trend that lockdowns only accelerated. Sure, you might have to wait a couple of months for new releases to hit streaming platforms, but that’s outweighed by the ease of curling up and watching from home. But this can’t be said for everyone.

The rest of the top ten highest grossing films last year didn’t hit the $2bn mark, but the list is still pretty revealing:

• Zootopia 2 ($1.9bn worldwide)

• Avatar: Fire and Ash ($1.5bn)

• Lilo & Stitch ($1.0bn)

• A Minecraft Movie ($1.0bn)

• Jurassic World: Rebirth ($0.9bn)

• Demon Slayer: Kimetsu No Yaiba Infinity Castle ($0.7bn)

• How to Train Your Dragon ($0.6bn)

• F1: The Movie ($0.6bn)

We might think of sequels as surefire winners, but another huge theme is kids films.

Parents don’t love the comfort and convenience of streaming if it means being trapped at home with a toddler and tidying up endless toys. An hours-long trip to the cinema can actually be a relief.

Kids are also notoriously bad at delayed gratification. Why wait two months for something to appear on a streaming platform if you could watch it at the cinema now? No wonder family films are still doing so well.

Minions and Monsters is out today, with a plot involving monsters being unleashed up on the world. In the Venn diagram of what currently works at the cinema, the circles would be sequels, otherworldly creatures, and kids films. Given that this one sits firmly in the middle, it will probably be an enormous hit.

This does a real injustice to taxi drivers (many of whom will be clued up investors) – but the saying isn’t really about them. It’s more about what happens when a stock becomes so buzzy that it starts to look like a good bet for smalltalk with your passengers.

Time in the market beats timing the market

Investing, at its core, is always a trade-off. Take on some extra risk in the hope of getting some extra reward in return. Analysts at Vanguard calculate that if you put £10,000 in a savings account at the end of 1998, it would have more than doubled to £21,000 by the end of 2025. This sounds great, until you read that the same amount invested in global stocks would have grown to almost £90,000. Research finds that sticking your money in global shares will deliver better returns than keeping it in a savings account over long periods

But returns are only half the story – there is also the issue of risk. Cash, for all its shortcomings, moves slowly and predictably. Inflation will nibble away at its real value (we all know that £100 doesn’t go anywhere near as far as it used to), but you won’t find your savings down 10 per cent on where they were a month ago.

In stock markets, movements are far sharper, and history tells us that many of the best days happen close to the worst ones – often when markets feel uncertain. Pandemics, wars and political shocks can leave investors reeling between optimism and pessimism. Deciding how much to invest (and where to put it) should be a careful calibration of how much you want to make and how much of this volatility you can stomach. No one wants to miss out on a great opportunity, but no one wants to lie awake at night worrying about their investments either.

Powered by FOMO?

Investing in something because everyone is talking about it is not the same as balancing our own appetite for risk and reward. But it is easy to see why it feels so tempting. Rising prices generate excitement, and this excitement can quickly spread. In Irrational Exuberance, economist Robert Shiller describes how a good investment narrative can spread like a contagion from person to person: Beanie Babies will be worth a fortune, the only way is up for Bitcoin, NFTs are the future of the art world.

Shiller thinks that investors might have their own private doubts about the value of an investment, but are drawn to it anyway through envy of others’ success and a gambler’s excitement. We might suspect that the price is stretched, but persuade ourselves that as long as enough other people continue to buy, there is still money to be made. Just as a good debater can see both sides of an argument, we wrestle with the positive and negative case. We can see the case for a price drop, but FOMO can nudge us into believing that things will go our way. You just need to exit the market before it all sours.

But this is the tricky part. Timing the market is notoriously difficult, especially when the bad days come so close to the good. If you never really believed in an investment, the temptation is to sell as soon as prices dip, and bruising losses can follow.

This is not to say that widely discussed investments are always doomed, or that enthusiasm is always misplaced. People have been kicking themselves for not buying Apple shares for decades, and if you had finally got in on the act last year, you would have made a 32 per cent return (after some considerable bumps in the road).

But when everyone is talking about an investment, it’s easy to move from reasoned decision making to fear of getting left behind. It’s a powerful instinct, but not necessarily a helpful one if it opens us up to sleepless nights and bad returns. Taxi drivers aren’t the problem here, FOMO is.

NB: This article is for informational purposes only and does not constitute financial advice. Investments can fall as well as rise in value, and you should make decisions based on your own circumstances.

When tickets were released at the end of last year, football supporters around the world felt their stomachs drop: prices were up almost 300 per cent compared to the World Cup in Qatar three years ago. The best tickets to the final in 2022 were around £1,000 – today the worst seats will set you back £4,300. The cheapest possible ticket to see an England game was over £165. Fifa, to its limited credit, made a small number of £45 tickets available to matches after the backlash.

If these prices look bad, consider how much worse things were for fans that missed out and were forced towards Fifa’s official resale platform. Fifa doesn’t set these prices, but it isn’t incentivised to ensure that they stay ‘affordable’ either: the organisation takes a 15 percent fee from both buyers and sellers. Given that tickets to the final have been listed for almost $2mn each, Fifa stands to make millions from official resales alone.

Why were tickets so expensive in the first place?

We know that prices in general have risen since 2022, but this doesn’t explain the enormous price hikes since the Qatar tournament. Fifa has never released its full structure, but it is open about using ‘variable pricing’, which means it ‘may adjust ticket prices throughout sales phases based on a review of demand and availability for each match’.

We can think of this as a slower and less ruthless version of the dynamic pricing that we see with concert tickets. Here, prices can rise by hundreds of pounds in the time between you putting them in your basket and eventually checking out if demand is high enough. When Oasis tickets went on sale in 2024, they were advertised at £150. By the time some fans had reached the front of the online queue the price had risen to £350.

With Fifa’s model, prices rise (and fall as it turns out) depending on demand – but far more slowly. The price of the best Category 1 seats for the final climbed from almost £6,000 in the early draw in October to £7,000 in December’s random draw, then to £8,200 in April’s last minute sales. Prices stayed fixed during each of these windows, but still crept upwards over time.

Fifa said that there were five million ticket requests in 24 hours after tickets were released to the public in December which “underlines soaring global demand”. High demand still meant rising prices, just less disorientatingly quickly than with ‘true’ dynamic pricing.

The same force that drives people to pay so much for Oasis tickets (it might be our only shot!) also propels us to pay so much for World Cup tickets. How many chances do you really have to go to a World Cup? In theory, perhaps about 20 over the course of your life. But once you factor in money, annual leave, family commitments and geography, the true number is probably far smaller. Add in the fact that many fans have always wanted to travel to the US, Mexico or Canada, and it can start to feel like a once in a lifetime event. As we so often see in economics, scarcity supports higher prices, creating a sense of urgency that leaves us willing to pay more.

Have ticket prices become Americanized?

Though the World Cup will be held in North America, the bulk of the matches (78 out of 104) will be held in the US. More than 5mn ticket holders are expected to watch in stadiums, and the US is due to welcome over 1mn visitors. This all implies that a lot of seats will be filled by American spectators. In the UK, we have a culture of £100 Premier League games. But across the pond, they have $4,000 Super Bowl tickets, $800 Wrestlemania seats and $1,100 NBA finals. Have prices just recalibrated to match this new, US customer base?

Reporters at the BBC highlighted that World Cup ticket prices (somewhere between $45 and $11k) now almost exactly line up with Taylor Swift tickets ($49-$11,000). This could just be the price of top tier American entertainment. But you can’t help but feel that football fans are getting a bad deal. Even with a cheap Taylor Swift ticket, you get to see the world’s biggest popstar (though perhaps with a restricted view). With a cheap World Cup ticket, you get to watch Uzbekistan (ranked 50th) battle DR Congo (ranked 46th).

But high prices have discouraged some international supporters from buying tickets at all, leaving Fifa with less demand than expected. The organisation hoped that releasing some last minute tickets in the run up towards the tournament would generate excitement and feel good stories, but it has only really generated headlines about stuttering seat prices.

Although prices are still high by historical standards, they fell shortly before the tournament started. When Fifa released its ‘last minute’ ticket tranche last month, tickets for the final dropped below £6,000 ($8,000) on the official resale site for the first time. Since this is the biggest ever World Cup (previous games had only 64 matches), there is plenty of ticket supply. A glance at stadium crowds will be our first indicator of whether Fifa’s pricing gamble has ultimately paid off.

And so it is here. In April, Chantal Fernandez wrote a brilliant article in The Cut on The Devil Wears Prada Inflation Index (you can read it here). It turns out that in the twenty years since the original film came out, the price of Miranda’s lattes have more than doubled, and Andy’s Chanel boots are almost triple the price. It was such a good idea that I couldn’t resist my own trickle-down version. Let’s dial the fashion down and the economics up, and calculate the Toy Story Inflation Index in honour of its release.

How much was a Toy Story toy thirty years ago?

Thanks to an archived version of the 1996 Argos catalogue, we know exactly how much a Toy Story toy would set you back thirty years ago:

• Talking Buzz Lightyear or Woody toy: £24.95

• Etch-a-sketch: £10.89

• Remote control car: £19.99

• Barbie (not Bo Peep, still a doll in a puffy dress): £13.95

• Toy phone: £8.50

These prices don’t actually look very different to today – especially if you consider how much the price of the average house (once £52k) and a Big Mac (then £1.79) have increased since 1996.

How much do they cost today?

According to the Argos website, the same toys would cost this much today:

• Talking Buzz or Woody toy: £40 (up 60 per cent)

• Etch-a-sketch: £10 (down 8 per cent)

• Remote control car: £10 (down 50 per cent)

• Barbie (puffy dress): £10 (down 28 per cent)

• Toy phone: £14.40 (up 70 per cent)

As the ones in bold show, some prices are actually lower today than they were thirty years ago. Intuitively, this feels wrong: according to the Bank of England, general prices have gone up by 105 per cent since 1996 – on average, if it cost £10 thirty years ago, you can expect it to cost more than £20 today. This is in line with the kind of price shifts in The Devil Wears Prada Inflation Index.

Why have some of these prices fallen?

One reason for lower prices is where things are produced. Today, toys are overwhelmingly made in China: it now accounts for 86 percent of world toy exports; the EU in second place has a tiny 5 per cent share. Thanks to lower wages and huge scale, toys can be manufactured very cheaply – and this has helped to drive prices down.

Lattes, on the other hand, cannot be outsourced in the same way: they have to be made by someone in your country paying rent for a coffee shop in your country. Designer boot production is also far less mobile: if you put a high emphasis on the quality of your materials and artisan craftsmanship, you are less able to lean into cheaper production overseas. No wonder prices have risen so much.

More bang for your buck

The shift is even more amazing when you consider that today’s toys give you more bang for your buck. Talking Buzz Lightyear and Woody toys now say more than thirty phrases – but back in 1996, it was just five. In the first movie, the toy phone had a rotary dial and a bell. Today, kids play with a fake iPhone that speaks to them through an animated screen.

This is a problem. It’s not really fair to compare prices across time if what you are getting is so much better than it used to be. This doesn’t really matter for lattes and boots, but is far more important when it comes to technology. If we defer again to Argos, we can see that the most expensive laptop on offer was £1,499 in 1996, against £4,400 today. But this is an absurd comparison: thirty years ago, a top of the range laptop couldn’t stream videos, use AI or scroll Instagram. Even the cheapest product (£170) could do all that today.

Economists try to adjust for this by doing something called a hedonic adjustment – working out how much of a product’s price reflects improved features, and stripping that out to measure a purer price change. Adjust for quality, and the toy phone and talking Buzz and Woody toys are probably cheaper today than they were thirty years ago, too.

A world of choice

It’s also striking just how many Toy Story products exist today compared to 1996. After the first film was released, Argos offered just nine toys and a single backpack. Today, there are more than 60 items. Some feel unnecessary (Slinky Dog book ends?) but others (like a talking Tonie box character) would have been beyond our wildest-1990s-dreams.

Thirty years ago, firms generally designed, ordered, then manufactured products months in advance, guided by forecasts of how much they would sell. Now, the process looks very different: companies work closely with manufacturers, produce small test batches, and pivot quickly towards whatever is selling well (probably not the book ends). Since 2000, variety – whether in toys or clothes – has exploded.

But part of this is also cultural. In 1996, you would only buy a Woody toy for a superfan of the film. Three decades and four films later, Toy Story is a staple. These days, you can buy a Toy Story toy for a boy or a girl and be pretty sure it will go down well. No wonder we want so many of them.

When the US won the bid in 2018, President Donald Trump was in his first term. He called it “a very special event”, adding that it was “probably certainly one of the biggest, and maybe the biggest sporting event in the world”. He also tried to persuade the rest of the planet to call it “soccer”.

The potential upside should be enormous. Millions of fans descend on your country (more than 5 million fans are expected to attend this year’s tournament, according to FIFA), and they will all spend money on transport, accommodation and beers. This creates exactly the kind of party atmosphere that can boost a country’s ‘animal spirits’. This is the almost-century-old idea that a spontaneous wave of optimism can sweep over a country, increasing consumer and business confidence enough to give the economy a meaningful boost.

So far, things have not gone as well as expected. In the weeks leading up to kick-off, hotel bookings were tracking lower than forecast, while the conflict in Iran has meant flight cancellations, higher prices and a drop in carrier traffic from the Middle East. In March, flights from Dubai airport were down 66 per cent on the year – and numbers have not yet fully recovered. Then there are visa and immigration policies to contend with – never ideal if you are trying to persuade fans from 48 countries to cross your borders wearing national football shirts.

The global backdrop has made things more difficult – but research tells us that hosting the World Cup is almost always a bad deal anyway. One study found that US host cities during the 1994 World Cup experienced cumulative losses of up to $9.3bn, instead of the expected $4-billion gain. Economists think that the 1974 World Cup held in Germany had no long-term impact on employment, while each tourist attracted to the 2010 World Cup effectively cost South Africa $13,000 in stadium construction. The benefits of higher visitor numbers and a national party atmosphere can pale in comparison to the costs of hosting a huge event.

It turns out that the real draw isn’t hosting the World Cup, but winning it. Economist Marco Mello found that victory in the tournament significant;y increased growth in the two quarters after the competition, with the boost driven by exports, rather than consumer spending. The theory is that triumph on the pitch enhances a country’s international standing, boosting demand for the kinds of products it sells.

People aren’t that moved by the host country’s efficient stadiums and competent infrastructure. What sticks is who won. Unsurprisingly, customers would rather buy from the tournament’s winners than its organisers.

If your immediate reaction is that it must have something to do with interest rates, you are sort of right. But in March, the base rate was 3.75 per cent. In April, it was still 3.75 per cent – and it is still 3.75 per cent today. If interest rates haven’t changed, why have mortgage rates shot up so much?

How interest rates really work

Every six weeks or so, nine rate-setters at the Bank of England meet to decide what to do with UK interest rates. They can raise them, cut them, or – as they have done so far this year – sit on their hands.

They are guided by what is happening with UK inflation. When it is running too high (as it did a couple of years ago), they act to make borrowing more expensive. This should slow down spending and business activity, cooling demand. Firms become less confident about putting up prices, and workers are less bullish about asking for a pay rise. In theory, inflation should drift back down to the 2 per cent target.

But the problem is that the Bank of England only controls the ‘base rate’. No normal people have a mortgage with the Bank, nor do any (non-bank) businesses have an account with them. The base rate applies to a narrow set of financial institutions. In theory, these financial institutions pass on the changes through loans, credit card deals and mortgages that they issue. In reality, it’s all a lot messier than that.

Sometimes, the Bank of England moves interest rates, but banks and building societies are slow to pass the changes on. As the base rate climbed in 2021, savings rates lagged behind. Providers count on our apathy: we lock savings away and forget about them – and banks know it. If you have a savings account, it’s worth checking the rate you are getting today. Many banks still pay 2-3 per cent on instant-access accounts – while you can get closer to 5 per cent if you shop around.

Other times, the rates we are offered move when the base rate doesn’t change at all. Since conflict in the Middle East broke out earlier in the year, energy supplies have been disrupted. For a big energy importer like the UK, this means that inflation is likely to increase again over the next few months. The bad news is that prices will rise faster. The better news is that it probably won’t be anywhere near as bad as the double-digit inflation we saw a few years ago.

Financial markets are now weighing up whether the Bank of England will increase interest rates over the next few months (among experts, the jury is still out), and positioning themselves accordingly. To manage this uncertainty, lenders rely on interest rate swaps – financial instruments that help them hedge against where interest rates might go next. These swaps act as a real-time measure of interest rate expectations, and feed directly into mortgage pricing. This is why mortgage rates can shift around even when the official base rate is on hold.

Talking tough

Even when the Bank of England holds steady, it sends a lot of signals about what it is going to do in the future. It publishes forecasts and scenarios, and each of the nine rate-setters gives their own take on what might happen next. The last meeting included some fairly punchy language (by central banker standards), including talk of acting ‘forcefully’ and possible future hikes.

But there is a kicker. The more that markets expect interest rate hikes, the less likely they are to actually happen. Since March, changing expectations have already pushed mortgage rates higher, leaving people with less to spend, which helps to cool inflationary pressure. The anticipation has done some of the Bank of England’s work for it – and people with mortgages are bearing the brunt.

Only around a third of people in the UK have a mortgage – the rest either own their property outright or rent. The average mortgage is also relatively small – at least compared to what a first time buyer has to choke up. The average size is around £180,000 – about £100k less than the average UK property price. Interest rates haven’t gone up, but for younger people with big mortgages it feels as though they have.

The JW Anderson Guinness range is a limited drop, and restricted supply tends to push prices up. But there is also a careful psychology to luxury pricing.

If you set the price too high, you will struggle to shift your products (at the time of writing, there were still plenty of £600 Guinness jeans in stock). But set the price too low and you risk losing your cachet: people won’t want your product as a status symbol if it doesn’t act like one. JW Anderson’s more accessible collaborations sell out within days, but widespread availability can dilute a brand’s appeal.

Few brands illustrate this tension better than Burberry.

The brand will sell you a trench coat for £2,000 – but also a perfume for £30 or some sunglasses for £200. The lower priced items mean that owning something by Burberry is very doable, even when a whole outfit is not. But greater accessibility comes with a risk. In the 2000s, there was a proliferation of real (and fake) Burberry check everywhere. Sales to the “wrong crowd” undermined exclusivity, and that meant that sales to the “right crowd” faltered.

Its reputation for exclusivity has recovered, but not without a fight. In 2018, Burberry attracted a backlash when it burnt millions of pounds worth of unsold stock including clothes, beauty products and bags. The public was horrified at the waste, but economists could pick out a clear chain of reasoning:

1. Sluggish sales meant that Burberry had a surplus of stock – but no demand for them at full price

2. To shift the stock, it would need to offer discounts…

3. But cheap products risk eroding the brand’s luxury status

4. To protect its exclusive image, Burberry chose to destroy the stock, rather than sell it off cheap

5. Exclusivity intact, it can continue to sell its goods at higher prices every year in the future

In luxury markets, exclusivity can be worth more than the goods themselves .

By the 2010s, news articles were gleefully reporting that celebrities were wearing Christmas jumpers – and the lineup included Taylor Swift, Snoop Dogg and Kanye West. Spikes in search traffic started appearing every winter, and by 2017, it was a fully fledged trend. We have been desperate for Christmas knitwear every winter since.

The transformation came about thanks to what marketing experts call “ironic consumption” – using something in a way that reverses its usual meaning. Christmas jumpers were traditionally hand made and practical – and this often made them aesthetically questionable as a result. Their revival played on this ugliness. As one expert put it in 2015, by wearing one, you could “satirise the style-establishment’s view that looking good is a serious business”.

But since becoming so normal, they have lost their subversive edge. Matching family sweaters aren’t ironic any more – they are sold every year at Asda. To stand out again, customers have to escalate the joke.

Another feature of ironic consumption is that it signals one meaning to an ‘in-group’ (who appreciate the irony), and a different meaning to an out-group (who don’t). What might look like a lovely Fair Isle jumper to your granny might actually say “Sleigh girl sleigh” or “make Christmas great again”. You can push back against work Christmas dinners and enforced family fun with a provocative knitted message.

Appealing to the right crowd

This might all seem very unseasonal, but there is another ugly sweater doing the rounds this summer. Guinness have launched a 17 piece range of luxury fashion with the designer JW Anderson – including a £1300 jumper that looks like a pub carpet. For £440 you can get some elasticated shorts that look like a bar towel, or for £200, a Guinness t-shirt.

The price means that these clothes are out of the reach of most of the people that are drinking the 2mn pints of Guinness poured every day. But that’s exactly the point – the high cost of these jumpers and shorts is designed to cement them as a kind of ‘Veblen good’. People will buy these products because of their high price, not in spite of it. The more expensive it is, the better it signals their status.

Guinness has also engineered a masterful repositioning over the past few years. In 2001, nobody was wearing Christmas jumpers, and only old men were drinking Guinness in pubs. Today, it is the UK’s top selling beer thanks to a surge of demand from younger men and women.

While a Guinness mug or souvenir t-shirt might make a perfect gift for one of the old guard (less than £20 on the official Guinness Amazon page), the new range tries to capture a younger and more ironically-minded audience. The clothes might look like pub carpets, but customers are in on the joke: it’s literally written in the product description on the website.

In a similar vein, though the JW Anderson carpet sweater costs £1300, you can also get an official Guinness Christmas jumper (with a pyramid of pints designed to look like a Christmas tree) for the knock-down price of £13. To the untrained eye, both mark you out as a Guinness fan wearing an ugly jumper.

Yet these similar looking products again occupy very separate markets. People browsing the JW Anderson collection wouldn’t be caught dead in the cheaper sweater, while those buying the £13 version would find spending £1250 more on a jumper absurd.

Wear the expensive jumper, and you try to transmit a very complicated signal. You aren’t just any Guinness fan: you are fashionable, you are rich, and you are wearing it with a heavy pinch of irony. And to some people, that will all be worth over £1,000.

And yet, these “sensible” purchases don’t always deserve their halo. Many of us are happy to pay for peace of mind – but that doesn’t mean that we are getting value for money. Economists have long puzzled over our fondness for extended warranties on cheap products like toasters. These policies are often riddled with so many exclusions that claiming them is difficult, and can end up costing more over their lifetime than the product itself. Retailers, unsurprisingly, love them: warranties can be more profitable than the appliances they came with.

We are even more cautious when it comes to our health. Spending on wellness feels like a kind of insurance – an investment now to avoid years of poor health later. But the logic can unravel here, too. Many health claims are slippery. In the UK, there are strict rules about what counts as “low fat” (not Jaffa Cakes, apparently…), but as trends have shifted, protein has become the new frontier.

For a product to qualify as “high protein”, at least 20 per cent of the energy value of the food must come from protein. But plenty of everyday foods – meat, tuna, eggs and tofu – already meet that bar. The result is a wave of “high protein” versions of foods that were already protein-rich to begin with, often sold at a premium for little added nutritional gain. You don’t need to pay for high-protein oats or milk if the standard version already does the job.

The problem is that once we label something as “sensible” spending we tend to stop questioning it. This means that “sensible” can also be a very effective disguise for terrible value.

The whole experience feels horribly designed. Each page offers you a raft of new options, and the price seems to drift higher with every click. Surely, you find yourself muttering, someone could design a better website than this?!

But actually, it’s working perfectly. The system isn’t designed to make booking a flight easy; it’s designed to work out exactly how much you are willing to pay. Economists call this price discrimination, and it’s becoming more precise, more pervasive – and more uncomfortable.

Price discrimination

In its simplest form, price discrimination means charging people different prices for the same good or service based on their different willingness to pay for it. It sounds vaguely unethical, but we are actually used to it – and happy with it in lots of situations. We don’t object to cheaper cinema tickets for children, reduced fares for off-peak trains, or senior citizen discounts at the zoo. These are all accepted examples of ‘third degree’ price discrimination: the art of sorting customers into different groups, and charging each set a different price.

These discounts are a way of drawing out reluctant customers, and filling seats that would otherwise be empty. Cinemas know that families would be far less likely to suffer through Minions and Monsters if they had to pay full price for every ticket. Trains would be empty at off-peak times without lower fares.

Self-selecting our way to higher prices

Third-degree price discrimination is so common with airfares that we take it for granted. We know that a flight will cost more at a ‘peak time’, whether that’s the school holidays or a Monday-Friday business trip. But airlines also go further: they get you to reveal how much you’re willing to pay by presenting you with a random-looking menu of options.

Instead of putting you in a category (like student, child or OAP), the company offers you a set of choices. Each option is carefully constructed to attract a certain type of customer, and the one you choose reveals something about yourself. The examples below are from the Ryanair website, but EasyJet and British Airways do something similar:

• By choosing a “Basic” option, you mark yourself out as a dedicated bargain hunter. You don’t mind who you sit with, and will happily leave some home comforts behind to avoid paying for a bag

• A “Regular” ticket (the name is carefully loaded to make it sound like a default) lets you board quicker and choose who you sit with. This strongly implies that you are travelling with a group or partner – and you will be willing to shell out to choose seats together

• A “Plus” ticket gives you a checked-in bag. By choosing this, you signal that you are going on a longer trip, and will never be able to cram everything you need in a rucksack

• “Flexi Plus” bookers mark themselves out as business travellers – they want fast tracked security, the ability to move to an earlier flight or reschedule their booking. In the case of the £150 flight I looked at, this option added an extra £200 to the booking price (far more than a “Basic” return).

When we choose our bundle, we sort ourselves into a group – and airlines charge us accordingly.

We see this kind of ‘unbundled’ pricing elsewhere too: in hotels, we often pay ‘extra’ for breakfast and WiFi (even though they used to come as standard). We might order a takeaway and pay a premium for ‘priority’ delivery. By offering a low starting price and adding a mountain of extras, companies can draw out the customers that are willing to pay for them.

But it also makes it harder for us to evaluate the full cost. Even if we booked the Flexi plus flight, we probably wouldn’t take in that it had cost us £350. Far easier to think of it as £150 – plus a few extras we picked up along the way.

Precision pricing

In theory, firms could even go one better: charging each customer an individual price based on what they would be willing to pay. Technology is bringing this closer to reality. AI tools could soon have the capacity to use customers’ schedules and preferences to find them the perfect flight…but this information would also provide a very good sense of what they might be willing to pay. This has obvious appeal to companies, but feels more unsettling to consumers.

One defence is to make sure that we are not sending companies the wrong information. We should be flexible with dates whenever we can – don’t end up signalling that you are a business traveller if you don’t really have the same restrictions. If you know you want a seat and a suitcase, ignore the headline price on sites like Skyscanner (which include taxes but not luggage) and go to airline sites to compare directly. It will mean more time trudging through “stupid” airline websites, but you will at least be armed with the knowledge that they are actually very clever.

This eye-watering figure is the result of a few forces that apply wherever you are in the country. First taxes including VAT and business rates, which will account for about £1.50 of that cost. Utility bills are still high, and so are staffing costs thanks to changes to employer national insurance and a higher minimum wage.

But there are some more London-specific pain points at play: rents are higher in the capital, and venues are forced to pass this on in the price of a pint. Over the UK as a whole, the cost is far lower at around £5. The O2 also has a peculiar advantage: a complete monopoly over its customers. You can’t take drinks in, but are stuck there for hours for a show – once you feel thirsty, you have no real choice but to visit their bar. The expensive pint also serves another purpose. It’s at the very top of the drinks list, and acts as a useful anchor – against this, a can of Pepsi for half the price (a whole £4!) suddenly looks like a bargain.

The price of a beer is also, in economic terminology, ‘salient’. We have a very loose grasp of how much some things should cost (an office chair? A lawnmower? Tickets to a theme park?) either because we buy them rarely or can choose to do without them altogether.

The price of a pint occupies a different place in our psychology and all drinkers will have a very firm idea about what its cost should be. We are all reeling from the price rises we have seen over the past five years – and what captures our outrage more starkly than a £10 pint?

The US Billboard Hot100 is more ruthless about weeding out old favourites. Nevertheless Kate Bush’s Running Up That Hill (1985) stormed back into the top 10 a couple of years ago, as did A Holly Jolly Christmas (1962) and Rockin’ Around the Christmas Tree (1958). The steady stream of new songs in the charts proves that we haven’t run out of new ideas. But we do seem unusually fond of revisiting old ones.

The business of looking backwards

Over the past few years, some old favourites have made a lot of new money. Barbie became the highest grossing film of 2023; the Oasis reunion was the hottest ticket of 2025; Friends was the third most streamed show in the UK last year – three decades after it first aired.

We are clearly willing customers – and perhaps that’s no surprise. Psychologists have long known that nostalgia feels particularly appealing during periods of uncertainty. In a world of 24-hour news and endless content churn, there is something soothing about returning to something that evokes a happy time. We can even feel wistful for eras that we never actually inhabited: for many younger people, the 1990s feels like a dreamworld of no smartphones, algorithms and work emails.

Our tendency to retreat to the past became even clearer during the Covid-19 pandemic. Researchers found that people gravitated towards nostalgic music, films, books, video games and their own old photos as a way of coping with the isolation. The yearning wasn’t for any particular decade – it was simply for a time before lockdowns, case numbers and the sense that normal live had started to dissolve.

Why companies love nostalgia as much as we do

It is tempting to think that brands get involved in nostalgia because they are afraid to take a punt on something new. There is definitely something to this argument. When Britney Spears sold the rights to her entire catalogue for a reported $200mn, Primary Wave was not banking on a stream of new material. Instead, they are betting that old songs will keep earning – through streaming, licensing, and TikTok revivals.

In 1995, psychologist Kyrstine Batcho developed The Nostalgia Inventory – a survey designed to measure how often and how intensely people experience nostalgic feelings. Some of the questions probe our emotions: do we miss the carefree feeling of youth, or a time before we knew sad or evil things? Others ask about things that we know can never return: beloved pets, lost relationships or the way that people in general ‘used to be’.

But crucially, many of the questions on the inventory relate to things that could still be accessible today: music, childhood heroes, toys, television shows and films. Companies can’t tap into all of our nostalgic impulses, but they can monetise a huge number of them. Your childhood pet can’t come back. But you can go to McDonalds for a Friends themed Big Mac meal.

The strange case of second hand nostalgia

This sounds cynical, but we are also fully aware that things from our childhood can be very valuable: almost everyone knows someone claiming to have a rare Pokemon card hidden in their parents’ loft. Original Star Wars action figures from the 1970s list for thousands of pounds on auction sites, as do early Transformers and pristine Cabbage Patch Dolls.

Scarcity plays a role here – there are only so many box-fresh Princess Leias left in the world. You buy one in the hope that its rarity will push the price up in the future. But there is also a thriving market for far less valuable toys, like My Little Pony dolls for less than $10 each. Nobody is buying these as an investment vehicle – they just enjoy the nostalgia.

But every time we look back, we make ‘new’ nostalgic products. Take Oasis: you can get a hat from their 1996 tour on eBay, or for slightly less, you can buy one from their 2025 reunion. These are seeing brisk trade today – but is this just short term FOMO? People might regret not buying a hat at the Oasis concert last year, but will there be a market for a “Live 2025” Oasis hat in ten year’s time?

My suspicion is that nostalgia acts a bit like the common cold – we are all susceptible, but the effect gets weaker with each exposure. The pull of new nostalgic editions will be weaker than for the original.

For most of us, the tooth fairy dealt in loose change. But this was much easier in the 1990s, when people carried cash and you could actually buy something with a 20p. As with everything else, prices have crept up since then. A 2023 survey put the figure at about £2.50 ($3.35). Not quite £500, but not pocket change either.

If you’re a parent, getting the first payment right really matters. Behavioural economists call this ‘anchoring’: we rely heavily on the first number we see in a new situation. If an older sibling receives £5 for their first missing tooth, this will be established as the “correct price” in the household. Offer anything less to their younger sibling, and you will face outrage. But offer anything more, and you will find yourself trying to explain inflation to a furious eldest child.

From this first tooth, a whole pricing structure emerges where first teeth command a premium, and very painful extractions might earn a bonus. And thanks to the school playground, children are acutely aware of the local market rate. It is very hard to insist that the tooth fairy is real, and gave your child £2.50 when their best friend got £5 for their front tooth.

If one generous parent raises the going rate, others tend to follow. Multiply that across a group of thirty children, each with twenty wobbly teeth and the financial hit is huge. The class will get £1,500 more for their baby teeth.

But in reality, even economists don’t think about it in purely economic terms. Losing teeth is a marker of growing up, and parents want to mark it as much as their children do. Seen in this light, Malik’s £500 looks more like a special gift – a way of giving your child a pot of savings as you might on a milestone birthday. I could also be reading too much economics into it. After all, he is a very rich pop star.