Even if the term “rockets and feathers” is new to you, the idea behind it is probably familiar. When companies face higher production costs, they quickly raise prices—like a rocket shooting up. But when those costs go down, prices tend to drop slowly, like a feather floating to the ground.

Economists have tried to explain this pattern, but their answers haven’t been fully convincing. A new study from the Kellogg School offers a different view, borrowing an idea from psychology popularized by Daniel Kahneman’s book Thinking, Fast and Slow. It suggests that people make decisions using one of two systems: a fast, automatic one (system 1) that relies on habits, or a slower, more thoughtful one (system 2) that takes more mental effort.

Rockets and feathers

The researchers applied this idea to how consumers behave and found it helps explain not just “rockets and feathers,” but also other puzzling trends like “shrinkflation.”

According to this model, when prices are stable, people stick with their habits, using system 1. But when prices change, they switch to system 2, putting more thought into their choices. Companies know this and act accordingly. When costs rise, they have to increase prices to stay profitable. But when costs fall, companies with strong sales often keep prices the same. This prevents customers from switching to system 2 and possibly choosing a competitor.

This interaction between companies and consumers creates the “rockets and feathers” effect.

Slower thinking

For consumers, using system 2 once in a while can be beneficial. If you never reconsider your brand choices, you might miss out on better deals. However, constantly using system 2 for every purchase would be exhausting, especially during times of high inflation when every decision requires more thought.

This model also helps explain other pricing quirks. For example, “shrinkflation”—when companies keep prices the same but reduce the size of the product—makes sense as a way to avoid triggering system 2. Even subscription services like Netflix or Amazon Prime rarely change their prices, not because it’s difficult, but because they don’t want customers to rethink their subscriptions.

By combining insights from economics and psychology, this study shows that consumer behavior is more complex than we often assume. While marketers have long understood the value of nudging consumers toward certain choices, economists have generally assumed that people make the best possible decisions. This research suggests that the reality is more nuanced, shaped by the way our minds work and how companies respond to it.