4 ms·

"Customers looked at the higher prices ($25 for the chicken instead of $21, $17 cocktails instead of $14) and ordered fewer and less-expensive items, even thoug

"Customers looked at the higher prices ($25 for the chicken instead of $21, $17 cocktails instead of $14) and ordered fewer and less-expensive items, even though they were paying exactly the same amount for them by tacking 20% onto the check at meal’s end." You know what, I worry about this sometimes. We think that we're so evolved and advanced race - that we have poetry and literature, modern medicine and rocket science. That we deserve to explore the stars, and if we met alien intelligence we'd sit at the table as equals. But turns out a normal human has emotion overriding even the simplest logic and basic arithmetic defeats most of us - I imagine it's not even just the "average" Joe - a lot of very intelligent people will see that $25 burger and decide that they'd rather go somewhere where the burger is $20, because it "feels cheaper". Monkey sees banana, monkey wants banana. Except this monkey can build rockets and nuclear reactors.

exogeny 4y ago
Back in the day, I used to oversee a lot of usability research for a well-known travel engine. Every single time, people would choose the lowest possible base price. It did not matter if you explained to them how uncomfortable it might be, any add-on fees they'd occur, quality of product, or literally anything else. All that mattered was the first number they saw. I don't know if it's a uniquely American thing, but the ability to wrap one's head around future cost additions or commensurate value is just completely not there, at all.
- ghaff 4y ago
  Almost certainly not uniquely American. I don't remember any behavioral economics research on this particular topic but it seems to be a pretty fundamental cognitive bias. (Of course, if someone is really just looking for the lowest price it's reasonable to expect that they'll mostly ignore the fact that they're going to be riding in the luggage compartment.)
- hotpotamus 4y ago
  Hidden fees are a strategy as old as time - what's uniquely American is the lack of regulation regarding them. Look at something as simple as sales tax - in the US, that's not included in the price on the shelf, but in most of the developed world it is. It's not like there's some centuries old custom at work there - it's regulation.
  - ghaff 4y ago
    There are a couple of different things. Are there hidden fees that most people don't know about? (Most people know about sales tax.) Do a lot of people just ignore the fact that they're going to have less legroom and won't be able to reserve a seat if they can get a lower price? Those are different things. The former is a dark pattern. The second just means a lot of people are very price sensitive.
sethammons 4y ago
my 10th grade AP History teacher offered snacks to the students. 25 cents a piece, or 3 for a dollar. Most of the year went by of people taking the dollar option before a student asked if they could have 4 for a dollar, to which the teacher said, "of course, they are 25 cents each."
treeman79 4y ago
Burger Kings Third-of-a-Pound failed because people thought it was less meat then a quarter pounder. Because 4 is greater than 3.
- Kranar 4y ago
  It was A&W and it's almost certainly BS. The only source for this was a single restaurant that hired a marketing firm to identify the reason for the failure. The marketing firm conducted a single focus study, whose methodology remains unknown but reported that one participant in the study asked why they should pay more money for a smaller product. Let me tell you something about marketing firms, many of don't exactly hire competent statisticians or people with a rigorous scientific background to investigate matters, and I doubt the situation was any better back in the 80s. Even today I've seen such firms ask leading questions, push people to give certain answers, have incredibly biased or non-random focus groups, or many other very basic mistakes.
  - lesuorac 4y ago
    > The firm eventually conducted a focus group to discover the truth: participants were concerned about the price of the burger. "Why should we pay the same amount for a third of a pound of meat as we do for a quarter-pound of meat?" they asked. > It turns out the majority of participants incorrectly believed one-third of a pound was actually smaller than a quarter of a pound. [1] Sure maybe only a single person asked the question but it sounds like they then polled the entire focus group afterwards. I'm not too sure what leading question to ask to get somebody who understands 1/3 > 1/4 to answer the inverse. [1]: https://awrestaurants.com/blog/aw-third-pound-burger-fractions https://awrestaurants.com/blog/aw-third-pound-burger-fractio...
    - Kranar 4y ago
      My position is to remain highly skeptical of this story. The single source of this entire anecdote comes from a book written by A&W's owner at the time (Alfred Taubman) that is left almost intentionally vague and has a clear conflict on interest. The book makes a lot of unsourced and unverified claims about how A&W's burger tasted better than McDonald's in blind tests, and a bunch of other claims about how A&W should have outperformed McDonalds, but all because Americans are too stupid to know that 1/3 is larger than 1/4, A&W failed to capture market share and that's why they had a major decline in the 80s. There is no other source for this story whatsoever other than the literal owner of A&W. The marketing firm (Yankelovich, Skelly and White) never released any details, no one else at the company ever wrote about it, and there's no way to independently verify any of these details to really understand what actually happened. As an FYI, McDonald's had a third pounder burger on their menu for 6 or so years and never seemed to have any issue with customers reporting feeling ripped off because of it. They removed it along with all of their premium menu items as part of an effort to simplify their offerings.
tines 4y ago
A $25 burger is more expensive than a $20 burger with a 20% tip ($24). But maybe that proves your point? :)
- gambiting 4y ago
  Haha yes I should have just said $24(although I know most people would just round it up). Well pointed out.
encoderer 4y ago
I’ve come to believe that most people are not cheap but they have an aversion to feeling like they were suckered out of their money. They will pay $65k for a truck that is known to have incredible margins for the manufacturer, and be delighted to do so, unless they find out they could have gotten it for $59k.
- ghaff 4y ago
  There are all sorts of biases in pricing. One I remember from Richard Thaler years ago was that, if you were comparison shopping in physical stores (this was pre-Web), if you saw a TV in a store that was $1 more expensive than in another store you had shopped in, you'd probably just shrug and buy it. But if some $2 item were $1 more, you'd probably go back to the first store even if it cost you more than $1 to do so--because fairness/being ripped off. (And I think most people are cheap at some level in many contexts.)
cowpig 4y ago
I don't see an emotion vs logic dichotomy being applicable here; we just don't process numbers like calculators because the world is messy and everything is a context-dependent guess with imperfect information. If 99.9% of the time I go to a restaurant the number I see is eventually adjusted by sales tax+tip, my mental "value" heuristic is going to be comparing that number to how hungry I am, how soon I think I'm getting the burger, how good I think this place is, etc. If half of restaurants abolished tips I'm sure I would develop the ability to incorporate that into my heuristic. And sure like any heuristic it has its failure modes but in general, if you look at a whole population, those heuristics tend to be pretty astonishingly effective in aggregate.
saurik 4y ago
This assumes everyone is tipping the same, "fair", unified rate; they aren't, though: people who tip more--for a variety of reasons that might have nothing to do with the wait staff--are subsidizing the prices for people who tip less. I wrote more about this in my adjacent comment below: https://news.ycombinator.com/item?id=34459678 https://news.ycombinator.com/item?id=34459678
RajT88 4y ago
It's even more dire than this. Anna Gunn played the emasculating wife of Walter White in "Breaking Bad". She was not a popular character (and wasn't supposed to be, at least at first). She received a myriad of death threats on social media for that portrayal. https://www.vulture.com/2013/08/breaking-bads-anna-gunn-confronts-skyler-hate.html https://www.vulture.com/2013/08/breaking-bads-anna-gunn-conf... I cannot express how bananas that is that people can't separate fiction from real life in this way. That these people are such emotional creatures that it never occurs to them that the way they feel towards the character is invalid towards the actress.
- rcme 4y ago
  (To me) it's abundantly clear that a certain percentage of the population is no better than feral beasts trained to live in society. For instance, some people report having no inner monologue. If such people are not introspectively evaluating their thoughts, then what are they doing? Most likely mindlessly going through the motions of their life as a simple stimulus/response machine.
  - nebula8804 4y ago
    Isn't that chalked up to the normal distribution? Can you really blame people who fall under the left side of the curve? Look at page 9 of this PDF. [1]:https://www.westga.edu/academics/research/vrc/assets/docs/the_normal_distribution_notes.pdf https://www.westga.edu/academics/research/vrc/assets/docs/th...
    - rcme 4y ago
      I’m not sure where blame is entering the equation. Is it possible to describe a phenomena without assigning blame?
    - SAI_Peregrinus 4y ago
      I have no inner monologue, unless I'm specifically thinking about what to say or write. Language is non-essential for thought. It's a way to map thoughts into a communicable form, but it's not thought. The concepts language describes exist independent of the language. Interestingly for me this translation of thought into language is much slower for writing than it is for speaking (with typing intermediate but closer to writing). I was diagnosed with Dysgraphia[1], as part of that evaluation I was given the Wechsler Adult Intelligence Scale—Third Edition (WAIS-III) when I was 16 years old, it gave me a verbal IQ of 147, a performance IQ of 125, and a full-scale IQ of 143. So I think I'd serve as a counterexample (sample size 1, though I know there are others) to the "left side of the curve" correlating with a lack of inner monologue (at least for this particular measurement, there are many others). Perhaps it goes the other way around, and the people who have to slow their thoughts down to translate everything into language are the left side of the curve, but more likely they're uncorrelated aspects of cognition. [1] https://en.wikipedia.org/wiki/Dysgraphia https://en.wikipedia.org/wiki/Dysgraphia
lesuorac 4y ago
> a lot of very intelligent people will see that $25 burger and decide that they'd rather go somewhere where the burger is $20, because it "feels cheaper". Isn't that the whole foundation of capitalism? If I'm the best at making widgets I can pump them out at $4/pop while the competition needs to do $5/pop and eventually my process for widget making is the dominate one. Maybe somebody innovates and gets down to $3/pop but in the end society is able to get more widgets/$. IMO, the real problem is all of these hidden fees. The idea of a price is that it's how much something will cost. The fact that you can juice your sales by providing a non-total price is a market distortion and should be corrected.

exogeny 4y ago

Back in the day, I used to oversee a lot of usability research for a well-known travel engine. Every single time, people would choose the lowest possible base price. It did not matter if you explained to them how uncomfortable it might be, any add-on fees they'd occur, quality of product, or literally anything else. All that mattered was the first number they saw. I don't know if it's a uniquely American thing, but the ability to wrap one's head around future cost additions or commensurate value is just completely not there, at all.

ghaff 4y ago
Almost certainly not uniquely American. I don't remember any behavioral economics research on this particular topic but it seems to be a pretty fundamental cognitive bias. (Of course, if someone is really just looking for the lowest price it's reasonable to expect that they'll mostly ignore the fact that they're going to be riding in the luggage compartment.)
hotpotamus 4y ago
Hidden fees are a strategy as old as time - what's uniquely American is the lack of regulation regarding them. Look at something as simple as sales tax - in the US, that's not included in the price on the shelf, but in most of the developed world it is. It's not like there's some centuries old custom at work there - it's regulation.
- ghaff 4y ago
  There are a couple of different things. Are there hidden fees that most people don't know about? (Most people know about sales tax.) Do a lot of people just ignore the fact that they're going to have less legroom and won't be able to reserve a seat if they can get a lower price? Those are different things. The former is a dark pattern. The second just means a lot of people are very price sensitive.

sethammons 4y ago

my 10th grade AP History teacher offered snacks to the students. 25 cents a piece, or 3 for a dollar. Most of the year went by of people taking the dollar option before a student asked if they could have 4 for a dollar, to which the teacher said, "of course, they are 25 cents each."

treeman79 4y ago

Burger Kings Third-of-a-Pound failed because people thought it was less meat then a quarter pounder. Because 4 is greater than 3.

Kranar 4y ago
It was A&W and it's almost certainly BS. The only source for this was a single restaurant that hired a marketing firm to identify the reason for the failure. The marketing firm conducted a single focus study, whose methodology remains unknown but reported that one participant in the study asked why they should pay more money for a smaller product. Let me tell you something about marketing firms, many of don't exactly hire competent statisticians or people with a rigorous scientific background to investigate matters, and I doubt the situation was any better back in the 80s. Even today I've seen such firms ask leading questions, push people to give certain answers, have incredibly biased or non-random focus groups, or many other very basic mistakes.
- lesuorac 4y ago
  > The firm eventually conducted a focus group to discover the truth: participants were concerned about the price of the burger. "Why should we pay the same amount for a third of a pound of meat as we do for a quarter-pound of meat?" they asked. > It turns out the majority of participants incorrectly believed one-third of a pound was actually smaller than a quarter of a pound. [1] Sure maybe only a single person asked the question but it sounds like they then polled the entire focus group afterwards. I'm not too sure what leading question to ask to get somebody who understands 1/3 > 1/4 to answer the inverse. [1]: https://awrestaurants.com/blog/aw-third-pound-burger-fractions https://awrestaurants.com/blog/aw-third-pound-burger-fractio...
  - Kranar 4y ago
    My position is to remain highly skeptical of this story. The single source of this entire anecdote comes from a book written by A&W's owner at the time (Alfred Taubman) that is left almost intentionally vague and has a clear conflict on interest. The book makes a lot of unsourced and unverified claims about how A&W's burger tasted better than McDonald's in blind tests, and a bunch of other claims about how A&W should have outperformed McDonalds, but all because Americans are too stupid to know that 1/3 is larger than 1/4, A&W failed to capture market share and that's why they had a major decline in the 80s. There is no other source for this story whatsoever other than the literal owner of A&W. The marketing firm (Yankelovich, Skelly and White) never released any details, no one else at the company ever wrote about it, and there's no way to independently verify any of these details to really understand what actually happened. As an FYI, McDonald's had a third pounder burger on their menu for 6 or so years and never seemed to have any issue with customers reporting feeling ripped off because of it. They removed it along with all of their premium menu items as part of an effort to simplify their offerings.

tines 4y ago

A $25 burger is more expensive than a $20 burger with a 20% tip ($24). But maybe that proves your point? :)

gambiting 4y ago
Haha yes I should have just said $24(although I know most people would just round it up). Well pointed out.

encoderer 4y ago

I’ve come to believe that most people are not cheap but they have an aversion to feeling like they were suckered out of their money. They will pay $65k for a truck that is known to have incredible margins for the manufacturer, and be delighted to do so, unless they find out they could have gotten it for $59k.

ghaff 4y ago
There are all sorts of biases in pricing. One I remember from Richard Thaler years ago was that, if you were comparison shopping in physical stores (this was pre-Web), if you saw a TV in a store that was $1 more expensive than in another store you had shopped in, you'd probably just shrug and buy it. But if some $2 item were $1 more, you'd probably go back to the first store even if it cost you more than $1 to do so--because fairness/being ripped off. (And I think most people are cheap at some level in many contexts.)

cowpig 4y ago

I don't see an emotion vs logic dichotomy being applicable here; we just don't process numbers like calculators because the world is messy and everything is a context-dependent guess with imperfect information. If 99.9% of the time I go to a restaurant the number I see is eventually adjusted by sales tax+tip, my mental "value" heuristic is going to be comparing that number to how hungry I am, how soon I think I'm getting the burger, how good I think this place is, etc. If half of restaurants abolished tips I'm sure I would develop the ability to incorporate that into my heuristic. And sure like any heuristic it has its failure modes but in general, if you look at a whole population, those heuristics tend to be pretty astonishingly effective in aggregate.

saurik 4y ago

This assumes everyone is tipping the same, "fair", unified rate; they aren't, though: people who tip more--for a variety of reasons that might have nothing to do with the wait staff--are subsidizing the prices for people who tip less. I wrote more about this in my adjacent comment below: https://news.ycombinator.com/item?id=34459678 https://news.ycombinator.com/item?id=34459678

RajT88 4y ago

It's even more dire than this. Anna Gunn played the emasculating wife of Walter White in "Breaking Bad". She was not a popular character (and wasn't supposed to be, at least at first). She received a myriad of death threats on social media for that portrayal. https://www.vulture.com/2013/08/breaking-bads-anna-gunn-confronts-skyler-hate.html https://www.vulture.com/2013/08/breaking-bads-anna-gunn-conf... I cannot express how bananas that is that people can't separate fiction from real life in this way. That these people are such emotional creatures that it never occurs to them that the way they feel towards the character is invalid towards the actress.

rcme 4y ago
(To me) it's abundantly clear that a certain percentage of the population is no better than feral beasts trained to live in society. For instance, some people report having no inner monologue. If such people are not introspectively evaluating their thoughts, then what are they doing? Most likely mindlessly going through the motions of their life as a simple stimulus/response machine.
- nebula8804 4y ago
  Isn't that chalked up to the normal distribution? Can you really blame people who fall under the left side of the curve? Look at page 9 of this PDF. [1]:https://www.westga.edu/academics/research/vrc/assets/docs/the_normal_distribution_notes.pdf https://www.westga.edu/academics/research/vrc/assets/docs/th...
  - rcme 4y ago
    I’m not sure where blame is entering the equation. Is it possible to describe a phenomena without assigning blame?
  - SAI_Peregrinus 4y ago
    I have no inner monologue, unless I'm specifically thinking about what to say or write. Language is non-essential for thought. It's a way to map thoughts into a communicable form, but it's not thought. The concepts language describes exist independent of the language. Interestingly for me this translation of thought into language is much slower for writing than it is for speaking (with typing intermediate but closer to writing). I was diagnosed with Dysgraphia[1], as part of that evaluation I was given the Wechsler Adult Intelligence Scale—Third Edition (WAIS-III) when I was 16 years old, it gave me a verbal IQ of 147, a performance IQ of 125, and a full-scale IQ of 143. So I think I'd serve as a counterexample (sample size 1, though I know there are others) to the "left side of the curve" correlating with a lack of inner monologue (at least for this particular measurement, there are many others). Perhaps it goes the other way around, and the people who have to slow their thoughts down to translate everything into language are the left side of the curve, but more likely they're uncorrelated aspects of cognition. [1] https://en.wikipedia.org/wiki/Dysgraphia https://en.wikipedia.org/wiki/Dysgraphia

lesuorac 4y ago

> a lot of very intelligent people will see that $25 burger and decide that they'd rather go somewhere where the burger is $20, because it "feels cheaper". Isn't that the whole foundation of capitalism? If I'm the best at making widgets I can pump them out at $4/pop while the competition needs to do $5/pop and eventually my process for widget making is the dominate one. Maybe somebody innovates and gets down to $3/pop but in the end society is able to get more widgets/$. IMO, the real problem is all of these hidden fees. The idea of a price is that it's how much something will cost. The fact that you can juice your sales by providing a non-total price is a market distortion and should be corrected.