The irrationality of free | Hacker News Reader

The irrationality of free

wiredjournal.com

27 pointsrantfoil12 comments

He should have done a 3rd experiment where the kids could choose between 3 hershey's + small snickers and 2 hershey's + large snickers.

This was interesting.

In the microcosm of this experiment, the choice of the free candy bar is irrational. The kids are actually choosing between two outcomes: outcome A which is three Hershey's kisses and small Snickers bar, and outcome B which is two Hershey's kisses and a large Snickers bar. Outcome B is definitely better.

Interestingly, in the grand scheme of things this isn't so illogical. If, for example, this was more like a storefront, where the kids could come and at any time get either free small Snickers bars or large Snickers bars for one kiss, then the former strategy is actually better.

Take this another step further and start to consider the cost of decision making itself. Think of the mental cost of constantly processing every outcome in search of maximum benefit and minimum cost. In the long run, applying the heuristic of FREE = GOOD is probably the best strategy from a cost/benefit perspective, since in most cases it does actually work.

This is a long way of saying that I think opting for free is not always rational in the immediate context but probably makes sense as a sort of general strategy for individuals in life.

Maybe I'm just restating the obvious but I thought I would throw this out there.

  Think of the mental cost of constantly processing every outcome in search 
  of maximum benefit and minimum cost.

That's an interesting observation... It would be extremely exciting if we could somehow process real-world information and create programs that calculated and displayed this kind of information to us. Humans seem to be lousy at this, and hence there is great potential for making machines that allow us to make more efficient decisions.

It is the same idea as applying fuzzy/probabilistic logic and rules of interference to the real world; the main technological difficulty isn't the logic per se, but translating information about the real world to a format we can apply the rules of logic to. I wonder what scientific insights we need to make before it becomes possible to do these things...it's got to be possible, right?

Says the human populace: "You can bury my cold dead body before I let some computer program make my decisions for me!"

Say businesses: "Please, we'll do anything to increase profits and ROI!"

Not to derail this post, but commenting on the 'allure of free' is starting to get as tired as the allure of free.

Agreed, except there was something else in this article that was interesting. The presence of a free alternative was alluring enough to prevent people from making a deal they normally would make, if only for the sake of keeping the "freeness."

In theory, this royally screws up the idealogical basis of the freemium model. If the presence of the free option kept them from entering into any transaction with a cost, even if there was a clear benefit and the cost was low, that's a problem for freemium.

Is it irrational or just people seeing beyond the boundaries of the experiment? Once the first trade is offered, it seems like human nature to think - "this isn't necessarily the end of the experiment - choosing the free one is the safe choice because it's possible I might get offered the same deal again, perhaps even multiple times, as long as I have chocolate kisses left."

For some reason, our brains tend to overvalue savings. I've noticed this myself with gas prices. I am willing to go out of my way to stations that charge 10-20 cents less per gallon. Is that really worth the trouble? At ten gallons, this only amounts to 1-2 dollars out of 40 total. It really isn't worth it for me, yet I feel compelled to do it.

The easy way around this problem is to be aware of the value of your time. If it takes you another ten minutes to save 1-2 dollars and it feels like a chore, then it's obviously a bad deal.

Of course, your time isn't always worth the same. You may find yourself on a Sunday morning with time to burn (or retired/unemployed), in which case you might as well look for a better deal as a matter of principle. It also may be the case that going out of your way is enjoyable for other reasons and doesn't feel like a chore.

It's all about being aware of how the price you pay for anything is composed of many variables (time, money, sacrifices, etc) whose relative values are constantly readjusting.

If it makes you feel any better, I guess you're performing a valuable service to society. You're keeping the market working the way it should by ensuring that stations with slightly lower prices get less business than stations with higher prices, which helps keep the prices down for the rest of us. So in addition to those one or two dollars of savings, you should also get the warm glowy feeling of being a public benefactor. Congratulations!

Humans are irrational. Even the person who thinks themselves the most rational will do irrational things from time to time, especially under stressful situations.

And if you think you can always overcome mental intertia and will yourself to do something: "Brain Scanner Can See Your Decisions Before You Make Them" http://news.ycombinator.com/item?id=162863

Pick up Dan's book, you won't be disappointed: Predictably Irrational

I'm about halfway through and loving it.

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