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People may spend 3-4x as much time trying out and choosing a car as buying an expensive TV, even though the car costs ~20X more and more research, haggling, etc

by cma 5y ago

People may spend 3-4x as much time trying out and choosing a car as buying an expensive TV, even though the car costs ~20X more and more research, haggling, etc. on the car could be worth 3 TVs, but more on the TV could only be like at most .2 TVs.

wongarsu 5y ago
People don't value money linearly. You wouldn't pay an additional $10 for a cup of filter coffee, but most people wouldn't think twice about paying an additional $10 for a car. But it's the same amount of money, so surely that's irrational in that situation. In other situations it makes complete sense. If you have $1M, losing $10 isn't nearly as big a deal as when those $10 were all you had. If you try to apply game theory to economics you apply a utility function to money to model this, and a logarithmic function maps quite well to how humans think about money.
- FartyMcFarter 5y ago
  > But it's the same amount of money, so surely that's irrational in that situation. Not necessarily, since many people buy coffee way more often than they buy a car.
- vincentmarle 5y ago
  Not disagreeing with your conclusion but there’s a difference between spending $10 more for 3 years of utility vs $10 more for 3 minutes of utility.
Ma8ee 5y ago
Yes, but you very soon reach the point of diminishing returns when you try to research any purchase. After a maximum a few hours it is hard to find any more useful information about most consumer goods. You have read all the specifications, and the tests and the reviews and went to the stores to look at the products in person. So even if you might spend half a day researching an expensive TV, you won't make a better buy of a car even if you spend more than a day or two researching. And if you spend ten full days to buy a car, you are most certainly wasting your time (and will lose more income than you can optimise your car purchase).

by cma 5y ago

wongarsu 5y ago

People don't value money linearly. You wouldn't pay an additional $10 for a cup of filter coffee, but most people wouldn't think twice about paying an additional $10 for a car. But it's the same amount of money, so surely that's irrational in that situation. In other situations it makes complete sense. If you have $1M, losing $10 isn't nearly as big a deal as when those $10 were all you had. If you try to apply game theory to economics you apply a utility function to money to model this, and a logarithmic function maps quite well to how humans think about money.

FartyMcFarter 5y ago
> But it's the same amount of money, so surely that's irrational in that situation. Not necessarily, since many people buy coffee way more often than they buy a car.
vincentmarle 5y ago
Not disagreeing with your conclusion but there’s a difference between spending $10 more for 3 years of utility vs $10 more for 3 minutes of utility.

Ma8ee 5y ago

Yes, but you very soon reach the point of diminishing returns when you try to research any purchase. After a maximum a few hours it is hard to find any more useful information about most consumer goods. You have read all the specifications, and the tests and the reviews and went to the stores to look at the products in person. So even if you might spend half a day researching an expensive TV, you won't make a better buy of a car even if you spend more than a day or two researching. And if you spend ten full days to buy a car, you are most certainly wasting your time (and will lose more income than you can optimise your car purchase).