Much of my personal study since working at Mercury Markets has centered on the way human reasoning fails; driven on by the blatant manifestations of confirmation bias and the narrative bias I saw on display there.
The latest in a long line of books that I have investigated in Predictably Irrational by Dan Areily. While I am only into the second chapter, there is an example in there of pure irrational behavior that resonates with me and I think is likely to resonate with everyone else who reads this. We will try to justify it in our heads, but from a purely economic perspective the behavior is inexplicable. This is not his example exactly.
Imagine you are at a store; you are buying a blender (or some other moderately priced item) and the price tag is $50. Now suppose you are at the register when someone tells you that the same item is available at another branch of the same store for $25 and that they have the item in stock. Traveling to the other branch will take about a half hour. Would you run to the other store? While most of us would agree that the circumstances would to some extent dictate their likelihood to pop cross town, I think most would admit that they would be tempted.
Now lets assume you are buying a new leather sofa. It's going to cost you $3000. As you prepare to pay, the clerk tells you that another branch of the same store has the same sofa, in stock, for $2975. Traveling to the other branch will take about a half hour. Would you run to the other store? Here I believe most people would admit that they are less tempted to make the trip, I know I would be unlikely to bother.
So whats going on here? It would seem that our time doesn't have a fixed value. In one scenario we would be sorely tempted to blow a half-hour to save $25 and in the other it doesn't seem worth the effort. While the tradeoff is precisely the same we seem to be driven to look at the problem to some extent as proportional. In one case we are saving fifty percent and in the other we are saving about eight tenths of a percent; one feels worth it and the other does not.
I am of the opinion that Homo economicus is no more than a branch of Eoanthropus dawsoni; hacked together to serve an agenda.
