On our twitter feed, we asked if there are any behavioral economic concepts that have changed your perspective on your decision making. Here is one example that comes to mind.
The concept of mental accounting says that people perceive and code different events as they make different decisions. A well-known scenario involves a calculator and a laptop computer. Consider a calculator that sells for $50 at store A. Ask yourself how far you’d be willing to walk (in order to exclude issues about gas costs) to get that same calculator for $20 less at store B. Say it’s 20 minutes. Now, you are also in the market for a laptop computer. You are looking at a model that costs $1,250. Would you walk 20 minutes if you knew a store that sold it for $1,230? Many so no. $20 on a $50 purchase is significant (40 percent), but $20 on a $1,250 purchase is peanuts (1.6 percent). But, hey, saving $20 is saving $20, regardless of how big a ticket the item is.
If you think this way all the time about big and small purchases, eventually you’ll have changed your perspective.
So how has a behavioral economics concept affected your perspective?
Tags: mental accounting