The "mere token" effect

[ciphergoth]

Happened across a fascinating new cognitive bias today: the "mere token" effect. In summary:

• If you offer people a choice between $300 in a week or $900 in a year, 62% of respondents choose the $300 in a week.
• If you tell them that, immediately after they choose, you're going to give them $50, and then present them with the same choice, they make roughly the same decision.
• If you offer them a choice between $50 now and $300 in a week, or $50 now and $900 in a year, suddenly 52% of respondents choose the $900 in a year option.

Obviously there's no rational reason to make a different choice in the second and third scenarios, the options in both scenarios are really the same, but the difference in the way they are presented makes a huge difference to people's responses.

It's worth noting that hyperbolic discounting with intertemporal bargaining, the model presented in "Breakdown of Will" that I've enthused about before, completely fails to predict this phenomenon.

Scope Insensitivity and the "Mere Token" Effect, Oleg Urminsky, 2006.

Update: I've edited the second point above: it used to read "If you give them $50, and then present them with the same choice, they make roughly the same decision". This gives the misleading impression that there's some difference in substance between the second and third points, which resulted in some discussions below. I hope that with the new phrasing, it's clear that there is no real difference at all between the second and third scenario; it is exactly the same choice phrased in two different ways. Updated: trying yet again with phrasing of the second choice.

Comments

[drdoug.livejournal.com]

Argh! No fair!

Yet another cognitive bias to watch out for. I like to think I'm relatively good at this sort of thing. My personal preference for deferred gratification options sometimes errs on the too-strong/time-discount-too-low side, which is unusual. (I've been known to save treats long past their edibility dates, and not particularly regretted it.) But nevertheless - I strongly suspect I'm somewhat prone to this when making snap judgements under pressure. And so I'll be trying to bear this one in mind, along with all the others I'm aware of ... adding to the risk of cognitive overload, making me more prone to errors of judgement. Whereas people seeking to exploit this in offers have the time to consider (and can pick just one).

Actually, though, those who do seek to exploit that sort of flaw (whether legit sales staff or scam artists) tend not to restrict themselves to a single strategy, and spotting any such tactics tends to be a red flag for me, and once I'm actively suspicious I'm very hard to convince.

'Frinstance, I can't see how I'm ever going to get my fogged double glazing panels replaced, since it requires interacting with double glazing sales people, and I've yet to meet ones who don't scream "Run away! Do not buy!" to me. It's life-limitingly foolish to invite known vampires in to your home ... but what if vampires are the only ones who can fix your windows?