How Behavioral Economics Has Made Me A Better Shopper
Start writing a post
Adulting

How Behavioral Economics Has Made Me A Better Shopper

Are you a rational consumer?

46
How Behavioral Economics Has Made Me A Better Shopper
Pexels

For the first time in my life, I need to do my own grocery shopping. So at least once a week you'll find me (along with my wife) at Aldi or Schnuck's, getting groceries for the week. The both of us being students we try and maintain some kind of budget, which has lead to me being more aware of how much we pay for some of our items.

Namely, what I've noticed is that many items cost twice as much at Schnuck's, then at Aldi, and yet - I still shop at Schnuck's, even if it does cost more. But I comforted myself, saying "Jake, the only reason you would pay twice as much would be if it's twice as good". This left me content after a while, but eventually, I found myself wondering - why do I buy what I buy?

At one point, economists thought that we bought what we did because it was the most rational decision, but the emerging science of Behavioral Economics has changed all that.

It seems that part of our decision is based on our budget. In essence, what we buy will fill how much money we've decided to use for buying something. Confusing? Let me try and explain, if my milk budget is $10 a month, then I have no problem spending all $10, even if I could get away with only spending $5 a month if I shopped at Aldi's.

Shopping at Aldi's would be the smarter choice, I would have an extra $5 to spend on cookies or something, but my spending on milk has expanded to fill all $10 a month, leaving me without any extra cookie-buying money.

This idea was demonstrated by Richard Thaler, who just recently won the Nobel prize in Economics, or as it's technically called "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" (the reason for the weird name is a story for another day).

He, along with other behavioral economists, has been reshaping how we see consumer behavior, even down to why I spend more than I should on milk and cookies. Thaler's work is surprisingly easy to read. He likes to use easily repeatable demonstrations, and his work is worth looking into. If you want to read something he wrote, here's a New York Times article he wrote.

One popular demonstration of his he often did with his students while he was a professor at Cornell. He would pick a student and tell them they would remain anonymous, and that he would pick another student, and the two of them would split $100, student 1 would decide how much each would get. Now think to yourself, how much would you share with the other person? Would you want all of it, they would have no idea you took all their potential money, you're anynomous. Or would you split it 50-50? Thaler found most people want to split it 50-50. Surprised? Most economists were too, "fairness" isn't rational. Here Thaler showed that we use more than just rationality to decide how to use our money.

He later expanded this experiment where the second student could reject the amount offered to them, but if they did reject it then no one would receive any money. Traditional economists would say that as long as they received some money anyone would accept, but the less they were offered the more likely they were to refect the money. Think about that, even though they would get a free $20, they turned it down because someone else would (unfairly) receive $80.

What do you think of this? Are people too irrational? Or would you reject $49 because of your sense of justice? If you want to read more about his work here is a Vox article I looked to for writing this post.

it's worth looking into why you've decided to buy what you buy, I know in at least my life it's meant some extra spending money for cookies along with my milk.

Report this Content
This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.
Student Life

Waitlisted for a College Class? Here's What to Do!

Dealing with the inevitable realities of college life.

58741
college students waiting in a long line in the hallway
StableDiffusion

Course registration at college can be a big hassle and is almost never talked about. Classes you want to take fill up before you get a chance to register. You might change your mind about a class you want to take and must struggle to find another class to fit in the same time period. You also have to make sure no classes clash by time. Like I said, it's a big hassle.

This semester, I was waitlisted for two classes. Most people in this situation, especially first years, freak out because they don't know what to do. Here is what you should do when this happens.

Keep Reading...Show less
a man and a woman sitting on the beach in front of the sunset

Whether you met your new love interest online, through mutual friends, or another way entirely, you'll definitely want to know what you're getting into. I mean, really, what's the point in entering a relationship with someone if you don't know whether or not you're compatible on a very basic level?

Consider these 21 questions to ask in the talking stage when getting to know that new guy or girl you just started talking to:

Keep Reading...Show less
Lifestyle

Challah vs. Easter Bread: A Delicious Dilemma

Is there really such a difference in Challah bread or Easter Bread?

37882
loaves of challah and easter bread stacked up aside each other, an abundance of food in baskets
StableDiffusion

Ever since I could remember, it was a treat to receive Easter Bread made by my grandmother. We would only have it once a year and the wait was excruciating. Now that my grandmother has gotten older, she has stopped baking a lot of her recipes that require a lot of hand usage--her traditional Italian baking means no machines. So for the past few years, I have missed enjoying my Easter Bread.

Keep Reading...Show less
Adulting

Unlocking Lake People's Secrets: 15 Must-Knows!

There's no other place you'd rather be in the summer.

959433
Group of joyful friends sitting in a boat
Haley Harvey

The people that spend their summers at the lake are a unique group of people.

Whether you grew up going to the lake, have only recently started going, or have only been once or twice, you know it takes a certain kind of person to be a lake person. To the long-time lake people, the lake holds a special place in your heart, no matter how dirty the water may look.

Keep Reading...Show less
Student Life

Top 10 Reasons My School Rocks!

Why I Chose a Small School Over a Big University.

194890
man in black long sleeve shirt and black pants walking on white concrete pathway

I was asked so many times why I wanted to go to a small school when a big university is so much better. Don't get me wrong, I'm sure a big university is great but I absolutely love going to a small school. I know that I miss out on big sporting events and having people actually know where it is. I can't even count how many times I've been asked where it is and I know they won't know so I just say "somewhere in the middle of Wisconsin." But, I get to know most people at my school and I know my professors very well. Not to mention, being able to walk to the other side of campus in 5 minutes at a casual walking pace. I am so happy I made the decision to go to school where I did. I love my school and these are just a few reasons why.

Keep Reading...Show less

Subscribe to Our Newsletter

Facebook Comments