Dollars and Sense

we can increase or decrease the pain of paying that we feel at any time, for any transaction. But we should do so deliberately, based upon how much we want to enjoy or limit our spending, rather than just letting it increase or decrease without our knowledge or control.

In short, because of the pain of paying, we’re willing to pay more before, less after, and even less during consumption of the very same product. The timing of payment truly matters.

When paying as we go, we may now find it challenging to balance the pain of paying against the pleasure of consumption.

thank-you note with a substantial tip). If we pay for something before consuming it, the actual consumption of it feels almost painless

If we pay for something before consuming it, the actual consumption of it feels almost painless

Because if we paid for it on the last day, the last few days of the safari would be filled with thoughts like “Is this worth it?” and “How much am I enjoying this?” By having these thoughts constantly rattling around in our heads, our enjoyment of the entire experience would be vastly diminished.

Dan once brought pizza into his class and charged the students 25 cents per bite. What was the effect? Huge bites. His students, trying to avoid the pain of paying, thought they found a workaround by taking extra-large bites. Of course, they suffered while they ate, with clogged throats and messy faces, so it wasn’t much of a bargain and it certainly wasn’t a pleasure.

we value money in the future less than we value it right now.

credit cards allow us to pay for things in the future (when exactly is our payment due?), they make our financial horizons less clear and our opportunity costs more blurry, and they lessen our current pain of paying.

Our hope is that the future of money will not just be about reducing the pain of paying, but that it will also offer us the opportunity to choose more deliberative, thoughtful, and painful payment methods.

Free is a strange price, and yes, it is a price.

Free is a strange price, and yes, it is a price. When something is free, we tend not to apply a cost-benefit analysis to it. That is, we choose something free over something that’s not, and that may not always be the best choice.

There is useful research that suggests that people consume more when everyone knows that the bill will be split, taking some advantage of their unsuspecting dinner partners,

people consume more when everyone knows that the bill will be split, taking some advantage of their unsuspecting dinner partners,

Taking the pain of paying into account, the recommended method for splitting the bill with friends is credit card roulette. When the server drops off the check at the end of a meal, every one puts down their credit card. The server picks one, and that one person pays the entire bill.

Taking the pain of paying into account, the recommended method for splitting the bill with friends is credit card roulette. When the server drops off the check at the end of a meal, every one puts down their credit card. The server picks one, and that one person pays the entire bill. A similar, less luck-reliant version of the same thing is to have payment rotate among friends.

We do not feel four times more distraught if we pay for ourselves and three friends. In fact, we feel significantly less than four times as badly.

We should also consider the increased collective pleasure from rotating the bill, because our friends get a good feeling when we pay for them, and we, too, feel good about treating our friends to something special.

But even if we end up paying a bit more in the long run for engaging in this practice, we are likely to experience less pain of paying and have more fun dining out.

In other words, the listing price changed how everyone valued the property, but most of them had absolutely no idea it was happening.