Do you remember how Tom Sawyer, the hero of adventure novels, dealt with unpleasant chores? He turned the laborious and tedious task of painting a fence into a source of fun that others could only envy. And if they’re envious anyway, why not just let them do all the work—and make some money off it while you’re at it? That’s how Mark Twain, in his book published more than a century ago, captured a phenomenon that can turn fun into work and work into fun. Are you sure you can tell one from the other?
Human preferences tend to be fickle, and the difference between a pleasant experience and an unpleasant chore can be just as unstable. Let’s say I offer you a decent sum of money to appear as an extra in a movie. You’d have to get to the set, put on a costume, and walk back and forth among the sets. On top of that, I end up changing my mind about the promised payment and don’t offer you any money, so you can only take the job for free. I assume you won’t be too eager to take it now. But what if I started with a different offer? You can act in a movie! You’ll get a costume and move around among real sets. Not everyone gets a chance like this, and of course, you’ll have to pay a fair price for it. And what if this opportunity fell into your lap completely for free! The first offer set the bar, and you’ll inevitably compare the second one to it. In one study, participants were divided into two groups, each receiving a different offer—one for a paid recitation and the other for a reimbursed one— significantly more of those who were first told they’d have to pay expressed interest in participating for free later on. You might be thinking that you’re not stupid—you know that extras get paid—and you’d definitely never agree to a similar offer. But what if you had no prior experience like this? Would you know whether to willingly pay for the experience or to ask for the money yourself?
We are creatures of habit and continuity. Our choices stem from our previous ones. Once we buy something for a certain amount for the first time, that price gets under our skin and guides our future decisions. This “fate” thus determines how much we’re willing to spend on the same or similar goods. Now try to think about the things you buy regularly. Is the benefit or pleasure they bring you proportional to the amount you had to earn to buy them, or have you simply gotten used to it? The fact that you and many other consumers have gone along with it doesn’t guarantee that it’s actually reasonable. In fact, it could just as easily have been set at random. When researchers showed students items ranging in value from ten to one hundred dollars, they asked them whether they would buy the item at a price determined by a random two-digit number. This served as the starting point for their answer to the second question: What is the maximum amount you would be willing to pay for it? People with a higher starting number then offered higher amounts for the items than those who happened to be given a lower number. Can you imagine voluntarily paying 80% more for a bottle of wine just because of a random number that kicked off your decision-making process?
It’s not easy to admit that our perception of the value of things is somewhat vague and easily influenced. But if you ever find yourself at the checkout counter overcome by an irresistible urge to give the cashier a lengthy lecture on how “bread used to be cheaper in our day,” try to remember that price anchors are lurking in your own mind as well.
Source:
- Ariely, D., Loewenstein, G., & Prelec, D. (2006). Tom Sawyer and the construction of value. Journal of Economic Behavior and Organization, 60(1), 1-10.
