The fifty dollar question
Try this before you read on.
You are buying a jacket for $200. A shop twenty minutes away has the same jacket for $150. Do you make the trip?
Now: you are buying a laptop for $2,000. A shop twenty minutes away has the same laptop for $1,950. Do you make the trip?
Most people say yes to the first and no to the second. I do too, when I am not paying attention.
Both trips take the same twenty minutes. Both save exactly fifty dollars. If your time has a price, the answer should be identical.
What is happening is that we do not evaluate the fifty dollars on its own. We evaluate it against the thing it is attached to. A quarter off feels substantial. Two and a half percent feels like nothing. The proportion hijacks the judgement even though only the absolute amount lands in your account.
I like this one because it is not a trick. Nothing is hidden, the numbers are simple, and you still feel the pull after it has been explained. That is worth sitting with, because it means the pull is not ignorance. Knowing about it does not switch it off.
It shows up in health decisions constantly. A $50 out-of-pocket cost feels different attached to a $60 GP visit than attached to a $6,000 procedure, and people’s willingness to pay moves accordingly. When we build choice experiments we have to decide which framing to use, and there is no neutral option. Every version is a version.
The practical use is small but real. When something is being sold to you as a percentage, convert it to dollars. When it is sold to you as dollars, convert it to a percentage. Whichever one feels worse is usually the one doing the work.