An (accidental) behavioural economist takes a break

A collection of vignettes illustrating the quirky (but not necessarily irrational) behaviour and decision-making of us human beings (primarily the author’s)

Taking some time off work changes one’s focus and perspective, but some thought processes just keep on running. If observing and seeking to understand human behaviour is your stock in trade, a holiday can be a rich seam of interesting and intriguing sightings. Here this spring’s collection.

Our destination was Cornwall this time, a stone’s throw from the southwestern extremity of mainland UK, Land’s End. That is a long drive from the Midlands where we live, and we were hoping to leave quite early so we would get there in good time to unload the car and get our provisions without needing to hurry.

But there was an unexpected fly in the ointment. The day before our departure, my phone battery had died (it had been walking on its last legs for a good while, but you know how it goes – there is never a good time to have it replaced). Among the worst possible times, though, is surely the morning you want to leave on time for a six-hour drive. Overnight on the charger, the battery appeared to have come to life again, but could it be trusted? I had a choice to make: leave later so I could get it changed, or leave on schedule but risk a week with a phone that didn’t hold its charge and that might actually die. Hmm…

Two utilities

Many people, including yours truly, can get a bit stressed about leaving later than planned. Understandable when you risk missing a train or a plane, but is it really that big an issue when it is just a drive to one’s final destination? Delaying our departure certainly felt very immediate and salient, while the potential problem of a failing phone felt remote and uncertain.

It reminded me of a paper by Adam Oliver, a behavioural economist at the London School of Economics, in which he contrasts remembered utility (how we recall it after the event) with decision utility (how we anticipate it at the point of decision). How did the utility of leaving on time (and arriving on time) compare with that of having a new battery in my phone? The decision utility didn’t help much: how on earth do you choose between arriving on schedule with possibly an unreliable phone, and arriving late but having your phone fixed? Remembered utility, however, was much more promising: what would leave me with the best memory – being without a phone for a week, or arriving a couple of hours late? This was a no brainer – thanks, Adam! So that morning, all relaxed, I popped over to the phone repair shop and got the battery fixed. We left a good hour later than foreseen, and because we got stuck in the rush hour late in the afternoon, got to our destination nearly two hours later than scheduled, but by the time we’d finished our dinner, our tardy arrival was completely forgotten.

The social domain and the commercial domain

As we entered the cottage, we found a bottle of wine waiting for us on the table – a nice touch, and just what we needed after a long journey. This is a typical example of the distinction between transactions in the commercial domain and in the social domain: renting the cottage was a commercial transaction, but the gift of the wine was a social one.

wine on table

Who paid for this wine? (image: Jo Zimny)

The accidental economist in me, however, wasn’t quite on vacation yet, and couldn’t help thinking about the utility equation once again. Did this arrangement maximize the utility for us and for the owners? Let’s look at the alternative. Say it was a £10 bottle: if the landlords had charged us £10 less and not left us the wine, we would both economically be no worse or better off. But we would have missed out on the social utility of receiving an unexpected gift (and the landlords potentially also on the corresponding warm glow). Moreover, by leaving us the wine, the owners had bought themselves a tiny bit of goodwill – it increased, by some small amount, the chance we would return to the same cottage in the future. So: thumbs up for the ‘free’ wine.

But wait: who actually paid for it? Was it not bought with our money and therefore part of the commercial transaction? Not really. Once we had paid the rent, it had become the owners’ money, and it was their choice what to do with it. The wine was well and truly their gift to us.

Too much choice

The paradox of choice, a phrase first coined by psychologist Barry Schwartz, describes the phenomenon which makes us decide not to make a purchase if the number of options gets too large. The classic example is that of the promotional jam stand in a supermarket where less jam was sold when there were 24 on offer than when there were just six (I wrote about it here).

I experienced a rather more extreme version on our holiday. We had been contemplating taking advantage of a big, county-wide event where hundreds of Cornwall-based artists opened their studio in the week we were there, and buy a painting of a seascape. After visiting a few studios, and browsing through the illustrated booklet with dozens more, however, I noticed I was no longer interested in seascapes at all. It was not just that I felt unable to choose among so many paintings. Seeing such multitudes (and imagining hundreds more) made me realize there was nothing special about boring seascapes. (Thankfully I have not yet been put off jam for life, simply because of the choice in the supermarket…)

The inexpensive experience

Experimental evidence suggests that wine tastes better if we are told it is more expensive, and the research of experimental psychologist and gastrophysicist Charles Spence at Oxford University suggests that the ‘theatricals’ around a meal – the surroundings, the noise, and the quality of cutlery and crockery are rather significant in our perception of value. So I was interested to see what kind of experience the ‘cosy, casual’, moderately priced  Mackerel Sky seafood bar in Newlyn would be like.

mackerel sky

Cosy and casual (image: Mackerel Sky)

To say that it is not a posh place would be an understatement. It is tiny (seating just 18 indoors), guests sit on old chairs and share tables, the kitchen area is barely separated from the dining area, and the toilet is in a building next door. Yet it was bustling, with three cooks and five servers keeping up with the guests’ orders, when we got there just after six on a Wednesday evening.

Did the decidedly downmarket surroundings detract from our experience? Au contraire. Clearly, it’s not the place to go when you want lengthy breaks between the courses to engage in meandering conversation with your companion. But the food was great, and I could not imagine my smoked mackerel pâté with apple jelly tasting any better served on a genuine Royal Doulton plate, eaten with a silver fork and with wine from a crystal goblet. Clearly context matters, and in this case at least, the basic surroundings added to the experience, rather than diminishing it. Not surprising, really, that it is in the top echelon (#34) of Tripadvisors’ ranking of more than 1,200 Cornish restaurants.

Given the high demand, they don’t want people to linger for too long, of course. The menu revealed an interesting little nudge to ensure people leave when they are done eating: there is no tea or coffee available. Clever.

Anchored weather

If you hope to spend your days walking, the weather is an important factor in how enjoyable a break turns out to be. In our case, the forecast for the week had been less than encouraging: with the exception of the first day, temperatures would barely exceed 15C, and we would get rain at least half of the time. So, we had come prepared: physically by bringing appropriate clothing and footwear, and mentally by adjusting our expectations – if the weather turned out as bad as predicted, at least it would be no worse than we had anticipated.

But as the days came and went, the weather remained mostly dry and sunny, save for the odd short shower and half a day’s rain. Had we been expecting normal late May weather, we would have been disappointed, but now it turned out altogether a more positive experience.

This can be seen as an example of anchoring **. Often this concept refers to prices – a jacket costing £80 seems a lot less expensive if you are told its original price was £150, or if you see that the most expensive jacket in the store costs £200. But as we see it can also apply to things that are not so easy to quantify. Had the forecast been more optimistic, the exact same weather might have left us with a much more miserable adventure.

But as we drove home, the realization that anchoring our expectations to a pessimistic forecast had turned our break into a very pleasant one was a worthy end to a week with many peaks. When you have eyes for it, behavioural economics is everywhere – even on holiday.

About koenfucius

Wisdom or koenfusion? Maybe the difference is not that big.
This entry was posted in Behavioural economics, Psychology and tagged , , . Bookmark the permalink.

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