Wednesday, March 18, 2009

Illusions of Value

Ohio State University has determined that when we think about money, the numbers involved can be more important than the value. Some of the subjects were actually making different choices depending on whether they were asked to make decisions about one dollar or 100 cents. In fact, it seemed like they thought that it was better to receive 100 cents than it was to receive a dollar.

To conduct the study, they used that "prisoner's dilemma" game. Are you familiar with it? I'm kind of sick of hearing about it, since it seems like the stock scenario that someone brings up when they want to sound like they know something about psychology or human behavior, but the idea is that you can screw over other "players" in the "game" or not screw them over. The outcome is based on their reactions, but it's a safer bet to screw them over (you can gain more if you don't, but you'd have to trust the other players for that).

Is anyone surprised that participants were more impressed by numbers than they were by actual values? It's kind of like the way that products are advertised for $39.99 instead of $40. Our minds can play tricks on us, so it's always important to think twice before you spend your hard-earned money.

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Da Old Man said...

Yeah, like when the gas station price per gallon is $1.72 and 9/10ths.
WTH is up with that?

Stanley! said...

I'll tell you what's up with that: industries have made a science out of figuring out just how far you can be pushed before you stop handing over your money. They're watching, they're studying, and they're comparing strategies that work so that they can develop better ones.

That tenth of a cent "savings" on a gallon of gasoline, that display at the front of the store when cheaper (but functionally identical) items are hidden somewhere on the back shelves, and even the music that some stores play are all part of carefully crafted strategies to make you $pend $pend $pend.

The header image is adapted from a photo taken by Bill McChesney and used under a creative commons license.
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