Sunday, February 06, 2011

Feeling Wasteful

Some new research coming out of London and Jerusalem has some interesting findings on loss aversion. It turns out, it is not the loss per se that makes us crazy. It’s the feeling of responsibility for the loss. Basically, they report on two findings:

1. we are willing to waste money, time, effort if it makes us feel like we wasted less

2. if we can blame the waste on other people, it doesn’t have the same effect.

So for example, if you get offered a deal for movie tickets that is either 3 for $12 or 2 for $10, but we only want two tickets, we might buy the 2 for $10. But then later if we decide we want another ticket, we can’t bring ourselves to pay $5 for it, or even $4 for it (which is less than we paid for the first two), because we could have had it for $2.

There was also a study that found if you lose your $5 ticket, we won’t buy another one for $5 because it feels like we are paying $10 for something worth only $5. Even though no matter what you do, you don’t get your original $5 back so you are really just paying $5 for something that you were willing to pay $5 for just a few minutes ago.