Cut your cell phone expenses in half and all of a sudden you feel a bit richer, but does that mean you think you should be driving a significantly more expensive car? When incomes increase, we tend to purchase more items, but luxury goods require a pretty substantial increase.
People will go to great lengths to get “free” wifi even though they may not realize the cost associated with the decision. In this commercial for Qwest Communication, they try to offer wifi where people actually want to go.
In his attempt to transform the Oakland Athletics, Billy Beane tries a revolutionary new approach to scouting players based on their productivity rather than purely on how they look on the field. During one of the montages, Beane expresses that his desire to win is dwarfed by his hatred of losing. He keenly tells his player that there is a difference between the two. His attitude is the mindset of prospect theory and loss aversion.
Charles and Gina have been secretly hooking up for a while, but now their parents have decided to start dating and it’s freaking the two of them out. Charles rushes to the office to show Gina a gift that his dad is planning to give Gina’s mom. At first the two are scared of the repercussions to their lives if their parents start dating, but quickly realize that the planned gift is much worse for their parents than for them. Gina also goes through her process of unwrapping gifts before the actual reveal because she doesn’t want to get surprised in photos. Her risk aversion results in lots of time spent to avoid embarrassment.
Captain Holt has told his squad not to give him any gifts, but he implies that only means if they are planning to purchase him something. Amy tried to find a loophole last year and got caught, but now realizes that the Captain only said they can’t buy him things. She decides to make him a scrapbook and foolishly believes that this counts as a loophole because she believes her time isn’t worth anything. Amy, who is usually pretty levelheaded, is forgetting the opportunity cost of her time.
In this commercial for the new caramel M&M’s, our grocery store employee is trying to buy back M&Ms from customers as they’re leaving the store. The employee offers $2, $3, and his watch to get the M&Ms back even though the customers could easily go through the line again and get a new bag. People tend to value items they possess at a higher rate than they actually paid for them and this action appears irrational since the transaction costs of buying another pack is already low.
Thanks to James Tierney for actually watching the commercials on Hulu:
Heather and Jen complain to Greg about all the awful gifts that they have received from Joan over the years. They realize this is the time to sell the items at a garage sale, but they can’t sell the stuff at Joan’s garage sell. They decide to host a simultaneous garage sale that focuses only on the bad gifts that they have received. This is a good example to show that the value Joan paid for the gifts will be much higher than the price Heather and Jen could expect to receive from a garage sale, which can be used to show the loss in economic surplus from this exchange.
Joan tries to give Jen and Greg a gift certificate for a couples massage because of how stressed they are. It turns out that Greg and Jen had already given her that gift certificate and caught her in the act of regifting the item. Joan claims they didn’t really need it because they were never really stressed so it was better to just give it back. One of the transactional issues of gift giving is that it’s hard to know exactly what the other person values, which creates losses in surplus.
Greg and Jen set an alarm for Valentine’s Day to try and have a second child. The year before, they had just had Lark and decided to try and make sure their children were 2 years apart. Now that the time has come, the two are having second thoughts about whether they are ready since the original reminder was made in a pre-Lark (their child) world. Our decisions from one time period to the next are often not in agreement with one another and causes us to appear to perform irrationally.