5 ms·

OTOH, sometimes our perception is multiplicative when it should be relative: charge me $100 extra on a house, I probably won't even notice; charge me $100 extra

by taejo 14y ago

OTOH, sometimes our perception is multiplicative when it should be relative: charge me $100 extra on a house, I probably won't even notice; charge me $100 extra on a bar of chocolate, there's no way I'm going to buy it. But either way I lose $100!

StavrosK 14y ago
You only buy a house once, you buy chocolate bars all the time. $100 on a chocolate bar every time compounds.
- RyanIyengar 14y ago
  Give me 30 years and 4% interest on a loan to pay off the chocolate bar and I probably wouldn't notice either.
- masterzora 14y ago
  One-time coupon for $.50 off a chocolate bar: probably going to take the time to clip it. One-time coupon for $.50 off a laptop: probably won't bother. You can find silly faults with individual examples all you want, but studies indicate that people have a tendency to think percentage-based about savings rather than absolute terms.
  - dmorgan 14y ago
    >You can find silly faults with individual examples all you want, but studies indicate that people have a tendency to think percentage-based about savings rather than absolute terms. Which sounds like the smart way to go about it. It seems a little illogical in the chocolate vs laptop $.50 off voucher, but it too makes sense. The laptop voucher provides almost no value to you, considering you are about to spent $700 dollars on the thing anyway. $.50 could be just the gas to go to the store to buy it. $.50 for the chocolate on the other hand, will be taken only by cash strapped people (or coupon maniacs). I doubt people with $700 at the ready to buy a laptop would at the same time clip a $.50 coupon for a chocolate bar.
    - tasuki 14y ago
      I would clip it.
    - masterzora 14y ago
      The $.50 is $.50 regardless of what the voucher is for. It provides exactly $.50 no matter what. Sure, maybe someone with $700 at the ready for a laptop won't be the kind to be clipping $.50 coupons for anything but the same tendency to consider percentages rather than absolute values remains regardless of actual numbers. People will pat themselves on the back for saving $10 on a $50 garment but won't bother going out of their way to save $100 on a $20000 car.
      - dmorgan 14y ago
        >People will pat themselves on the back for saving $10 on a $50 garment but won't bother going out of their way to save $100 on a $20000 car. Which also makes sense. $100,000 to me is serious money. To Bill Gates it's small change. Money is a relative - percentage thing. A $20,000 car is a purchase you make once in 5-10 years. Saving $100 means nothing in that context --you're already parting with 200 times the amount, so if the $100 amount meant something for you, you'd have gone for a cheaper, say $15000, car in the first place... Savings of $10 (20%) on small items, like food or garments, on the other hand, pile up. You spend more than $20,000 on small items per year than you do on cars...
  - rythie 14y ago
    The $.50 off a chocolate bar may actually cost you money, since it will encourage you to buy the chocolate bar when you weren't planning on buying one at all. In fact worse than that, it may start a habbit of buying those chocolate bars.
- YokoZar 14y ago
  It's still a valid observation though. People don't drive to another store to save 10 dollars on a 500 dollar couch but they will drive all the way across town to save 10 cents a gallon on gas. This isn't rational: they're clearly not buying the 100 gallons of gas for the gas-drive to make sense.
scott_s 14y ago
Dan Arielly's "Predictably Irrational" (http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 http://www.amazon.com/Predictably-Irrational-Revised-Expande...) is a great book that covers such phenomenon.

by taejo 14y ago

StavrosK 14y ago

You only buy a house once, you buy chocolate bars all the time. $100 on a chocolate bar every time compounds.

RyanIyengar 14y ago
Give me 30 years and 4% interest on a loan to pay off the chocolate bar and I probably wouldn't notice either.
masterzora 14y ago
One-time coupon for $.50 off a chocolate bar: probably going to take the time to clip it. One-time coupon for $.50 off a laptop: probably won't bother. You can find silly faults with individual examples all you want, but studies indicate that people have a tendency to think percentage-based about savings rather than absolute terms.
- dmorgan 14y ago
  >You can find silly faults with individual examples all you want, but studies indicate that people have a tendency to think percentage-based about savings rather than absolute terms. Which sounds like the smart way to go about it. It seems a little illogical in the chocolate vs laptop $.50 off voucher, but it too makes sense. The laptop voucher provides almost no value to you, considering you are about to spent $700 dollars on the thing anyway. $.50 could be just the gas to go to the store to buy it. $.50 for the chocolate on the other hand, will be taken only by cash strapped people (or coupon maniacs). I doubt people with $700 at the ready to buy a laptop would at the same time clip a $.50 coupon for a chocolate bar.
  - tasuki 14y ago
    I would clip it.
  - masterzora 14y ago
    The $.50 is $.50 regardless of what the voucher is for. It provides exactly $.50 no matter what. Sure, maybe someone with $700 at the ready for a laptop won't be the kind to be clipping $.50 coupons for anything but the same tendency to consider percentages rather than absolute values remains regardless of actual numbers. People will pat themselves on the back for saving $10 on a $50 garment but won't bother going out of their way to save $100 on a $20000 car.
    - dmorgan 14y ago
      >People will pat themselves on the back for saving $10 on a $50 garment but won't bother going out of their way to save $100 on a $20000 car. Which also makes sense. $100,000 to me is serious money. To Bill Gates it's small change. Money is a relative - percentage thing. A $20,000 car is a purchase you make once in 5-10 years. Saving $100 means nothing in that context --you're already parting with 200 times the amount, so if the $100 amount meant something for you, you'd have gone for a cheaper, say $15000, car in the first place... Savings of $10 (20%) on small items, like food or garments, on the other hand, pile up. You spend more than $20,000 on small items per year than you do on cars...
- rythie 14y ago
  The $.50 off a chocolate bar may actually cost you money, since it will encourage you to buy the chocolate bar when you weren't planning on buying one at all. In fact worse than that, it may start a habbit of buying those chocolate bars.
YokoZar 14y ago
It's still a valid observation though. People don't drive to another store to save 10 dollars on a 500 dollar couch but they will drive all the way across town to save 10 cents a gallon on gas. This isn't rational: they're clearly not buying the 100 gallons of gas for the gas-drive to make sense.

scott_s 14y ago

Dan Arielly's "Predictably Irrational" (http://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 http://www.amazon.com/Predictably-Irrational-Revised-Expande...) is a great book that covers such phenomenon.