An accidental behavioural economist is on holiday – again

Human behaviour continues to be an inexhaustible source of wonder and fascination – even when on holiday

Unexpectedly, your correspondent had an opportunity to return to his native country at short notice for a brief holiday after skipping the annual tradition last year. And yet again, it provided ample educational entertainment (or entertaining education) for any behavioural economist, accidental or not. Take a seat, and prepare for some anecdotes.

International travel has become a bit more complicated since the beginning of 2020. One of the first tasks – other than booking the ferry crossing between the UK and France – was to figure out what hoops we’d need to jump through to get to our destination. Thanks to constant mentions in the British media, we knew we’d need an antigen test before travelling back home and a PCR test upon return, and those were quickly arranged. The conditions to travel to (or in our case, through) France had recently been relaxed from “Don’t even think about it” to “Vaccinated? Do come in!”, albeit with a declaration sur l’honneur that we didn’t have a fever, had not been close to a sick person etc. Easy peasy!

Emotions, irrepressible emotions

Britain may have left the EU, but the rest is still there, so I naturally assumed that Belgium would apply the same relaxed attitude. Or was it wishful thinking, that pernicious cognitive error in which it is our desires, rather than evidence, that shapes our beliefs? Anyway, the day after I had booked the ferry ticket and the tests, I discovered that entering Belgium would entail not only a PCR test within two days of arrival, but also self-isolation until the test was confirmed negative. Our plan was to spend three days at the seaside, but we were going to arrive on a Friday evening, so suddenly the prospect loomed of having to stay indoors all weekend, get a test on Monday morning, and then wait another 24 hours for the result. That would shorten our seaside stay to, well, zero. Eek.

A popular holiday attraction these days (image: Dunk/Flickr CC BY 2.0)

Was it still worth it? Had I realized earlier, I’d probably have given up the idea before making any commitment. But the ticket was non-refundable, and pretty pricey! Pessimism bias in the red corner, sunk cost fallacy in the blue one, two types of loss aversion pitted against one another. Well, my friends, do not diss good old sunk cost fallacy. We decided to persist and not be deterred by the doom scenario – and we’re glad we did. I then found out the local hospital conducted PCR tests during the weekend mornings too (without appointment!). So, on the day after our arrival, we queued up with about 20 others, and by 4pm we had our negative results and at once our vacation could start for real.

Quirky motives

As we arrived, things looked pretty much how we remembered them from two years ago. However, one exception struck me at once. The flat where we have been staying during our summer visits to the old country is located close to the beach, where car parking is scarce and expensive. For many years, cheapskates as we are, we have dropped the bags off, and then driven to the outskirts, a good ten minutes’ walk away, to leave the car where parking is free (as loyal readers might remember from four years ago). Alas, even there, free parking had now disappeared, but for a small consideration of 5 euros (85p, $1.17) I could leave it all day. Time to take my own advice from back then: mental accounting! Bearing in mind the total cost of the trip (not least the cost of all the tests), 20 euros for four days’ parking seemed negligible in comparison – a fine case of motivated reasoning. Since I had no choice but to pay, I might as well reduce the corresponding pain by framing it in that way.

Other things had not changed, including the number of dog owners, and a commensurate amount of dog excrement on the pavements. Even on my walk from the car to the flat, I immediately needed to engage scanning mode: while contemplating the idiosyncratic architecture with one eye, the other constantly glanced ahead to avoid a smelly encounter. It is not that the local council had not adopted some pedigreed behavioural interventions: there are “poo tubes” all over the place, making it easy for dog owners to dispose of the plastic bags containing their pets’ recent production, with plenty of signs reminding them to do so. These classic nudges are complemented by equally classic incentives: a fine for leaving dog poo of 105 euros during the week, with a 40-euro turd surcharge on Saturdays and Sundays. But it was clear that this combination, even underpinned by remedial instruments in the shape of a fleet of poo vacuums roaming the streets, as is often the case, was no match for the prevailing social norm among many dog owners. Changing social norms is hard to do, especially in a town where, over the summer season, most dog owners are tourists with little stake in the upkeep of the place. Behavioural interventions, sadly, have their limits.

Behavioural interventions don’t always work (image: Jonathan Davis/Flickr CC BY NC 2.0)

Principles, profits and irrationality

On Tuesday morning, as the two previous days, we trundled over to the local mini-mart for some fresh breakfast pastries. Retailers in Belgium as most everywhere else have had a tough time, so we particularly wanted to support this store. As we approached, we realized the shutters were down, and a notice informed us that the shop was closed on Tuesdays. Now, in Belgium, shops are obliged to close their doors one day per week, but stores in recognized tourist areas are exempt from this rule. The owner of this one clearly had voluntarily made the decision to sacrifice approximately 1/7 of the weekly turnover. Irrational? Some (behavioural) economists might say so. Your correspondent is not among them, though. Perhaps the weekly day of closure is an important principle for the owner, perhaps he feels he must be there all the time when it is open and at the same time feels he does not want to work 7 days a week. Who are we to question the rationality of whatever his  preferences are to decide to close one day per week?

A similar conundrum arose in a discussion I had while having dinner in a somewhat unusual restaurant in town. It is located in a large old shed, with a décor to match: the simplest chairs and tables arranged in long rows seating well over 100 people, much like a school refectory. It also serves only seafood (no meat or vegetarian dishes), AND NO FRIES (everything is served with bread and butter). Doesn’t that put people off, and might making concessions on the menu widen the net, so to speak? For sure. But the place is pretty much packed every evening, even with a large number of outside tables in summer, so trying to attract more diners would be pointless. Might it instead be possible to increase the margins (by raising prices)? Undoubtedly, given that it was full, even on a rainy weekday. But here too, there are perhaps other concerns are at play than pure economics. The restaurant’s challenge is akin to the artist who sells out night after night. This leaves money on the table: at least some people would be prepared to pay more, and that would be pure profit (as ticket resellers prove time and time again). But raising prices would tarnish their reputation – and the same might well be true for this restaurant. Precisely because they are popular, largely thanks to their reputation (which stretches far) they can afford to decide what is, and isn’t on the menu, and maybe that is what is important to the owners.

Like all of us, these business owners tend to do what feels right, and while earning money may well figure in it, it is rarely the only, or even dominant motive. And ‘doing what feels right’ would similarly seem to be the driver behind the behaviours in the other observations in this piece: the careless dog owners, my rationalizing of the cost of parking, decisions on the basis of wishful thinking or the consideration of sunk cost.

When looking for the reasons for behaviour, perhaps we need look no further than our innermost feelings.

About koenfucius

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

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