One of the tough parts of buying Christmas gifts is that we don’t have perfect information regarding what the other person really wants. This issue often leads to us buying gifts for people based on what we think they’d like. This commercial from eBay points out that you can find a variety of gifts that someone would put on their list are low prices if you shop on eBay.
An example of the endowment effect. The customer on the left is willing to give up a dollar but not his Double Stacker. This seems irrational as the Double Stacker only has a market value of one dollar. The endowment effect states that the possessor of a good over-values the good. This is illustrated in the commercial as the customer on the left refuses to give up his Double Stacker. For the classic coffee mug example, see Kahneman, Knetsch, and Thaler (1990).
Clip and summary provided by YouTube User chilibandito.
Ryan goes through the steps he had to complete in order to cancel his gym membership. By requiring all of the additional steps to opt out of the membership, it decreases the likelihood that individuals will actually cancel their membership and instead pay the monthly fee despite not wanting the service. Ryan even discusses how he’s fallen victim to the sunk cost fallacy because he walked by his gym on the way to purchase envelopes for the letter, but he was already “in too deep” to stop by and cancel in person.
Rock, paper, scissors is a good game to help settle a dispute, but this simultaneous move game has no clear advantage. It helps if you have an actual rock in your back pocket though.
When one party has more information about themselves than the other party, economists describe this situation as asymmetric information. We know a lot about our “true” selves, but we can use signals to send to other parties to either conceal our true selves or hide a characteristic we don’t want to reveal. In this clever Budweiser ad, the hitchhiker is trying to conceal his real intentions by carrying a case of Bud Light.
Tim decides to hide a blow torch from his co-host, Al, in order to teach a lesson to his young children watching at home. Unfortunately, Al doesn’t know that the blow torch has been hidden and he believes he has lost the item on live television. Asymmetric information occurs when one party has more information than the other party in a transaction. When one party has more information, they are better able to make decisions and make take advantage of the unknowing party.
How a survey questions is asked may produced biased results, especially if the surveyor is trying to elicit a particular response. Besides the issues of responders trying to answer questions that they believe the researcher is asking, biased surveys can be used to show support both for and against the same topic. In this sketch comedy piece, Sir Appleby gives examples to his friend about various questions that could produce an opinion of supporting AND opposing conscription.
H/T to Chris Neill for the suggestion!
Homer and Lisa go to the Springfield Museum, but Homer isn’t sure he understands the entrance policy. He checks with the attendant, but doesn’t know why anyone would want to pay the suggested donation when they could go in without paying anything. Because the museum is available to everyone, regardless of whether they pay, it operates similar to a public good. The problem? Public goods are subject to free riders, like Homer.
Asrar Chowdhury has a great summary of this episode on The Daily Star as well.
Louis CK works through the rational model of crime by Becker and why he’s happy that there are laws against murdering people. This clips would be great for a behavioral economics course or maybe a funny introduction to principles to talk about incentives, externalities, and public policy.
Glenn wanted to see Saw because he thought it was about carpentry, but he quickly realized it was a horror movie. He wasn’t having a good time and even threw up in his lap, but his wife didn’t want to leave because they paid for the ticket and it was date night. Glenn and his wife should have left if they weren’t enjoying their movie since the tickets were non-refundable, but like many people, Glenn and his wife fell for the sunk cost fallacy.