Saturday, January 13, 2007

The Perception of Money

How do you view money?

Here are a couple vignettes - what would you do?
(These are academic questions so don't add any "real word" conditions to the story.)

Vignette 1
You visit a bookstore to buy a new book which costs $35. While in the bookstore, you find out that the same book is for sale for $15 in another bookstore in the same mall.
Do you go to the other bookstore to buy the book?

Vignette 2
You visit a car dealer at an auto-park (car mall) to buy a new, $30,000, car. Just as you've decided to make the purchase at the current dealer you find out that another dealer, in the same auto-park, has the exact same car for sale for $20 less. (Let's just say the two cars are indistinguishable and haggling, financing, sales commissions, etc., aren't an issue.)
Do you go to the other car dealer to buy the same car?

Most people would answer yes to the first vignette and no to the second. When buying a $30,000 car, what's a $20 difference really mean? In actuality, though, there's no difference between the $20 you save when buying a book and the $20 you save when buying a car since $20 has the same, absolute, buying value.

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