Tuesday, August 14, 2012

handbags and gladrags #lossaversion

So it goes that the pain of paying an extra fee for checked bags when you arrive at the airport is exasperated by the fact that you have already had to fork out for your ticket and so the additional cost of your luggage fee adds up as two separate losses.

Although the cost would be roughly the same one feels less aggrieved when paying for both at the same time on booking the ticket.

It's one loss.

So, two losses separately are more painful than if they were joined together, and likewise two gains separately are more enjoyable than when they are experienced together.

One little nudge to offset the pain of a loss is to bundle in a small gain following the original loss.

This is also know as the 'silver lining' effect.

Car dealers that offer 'cashback' as part of the deal know this.

In fact if one wants to dive deep into behavioural economics then go spend a few days in a car dealership, those guys have been practicing many of the principles for years, they just didn't have a name for it.

However my intuition tells me that the people who put up this sign need to do a bit more work on their subtleties....

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