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Do things that are illogical?
This is too broad of a question.. so let me narrow it down to a specific situation that just popped into my head:
Why do people buy lottery tickets? More specifically even, why do logical and smart people buy lottery tickets? Just the other week, I chipped in $2 for our lotto max pool, knowing full well that I'm losing money by doing it. That if I were to do it an infinite amount of times, I'd end up in the red.
I've been wracking my mind around this, and it's not being helped by the fact that just a little while ago, I went to grab a coffee and instead of walking 1 minute to get a free one from Mickey D's, I walked for 6 minutes to the nearest Timmies to pay $1.86 for basically the same coffee (at least I can't tell the difference, not a connoisseur). Partly I guess it has to do with the fact that I don't trust things that are free (since if they were any good they'd cost money) i.e, see A.L's quote:+ Show Spoiler +I don't understand successful people doing things for free. If someone offers you a free pair of shoes, you wouldn't take it. You would think something's wrong with the shoes, that if they were any good they would cost money, that someone's trying to pull a fast one on you. It's the same way with people's time. Someone offers me something for free, I have no choice but to assume it has no value. Someone says they'll help me for free, they must not be very good at what they're offering to help me do. I wouldn't send a child to a free school, I wouldn't rely on the free police to protect my family, and I certainly wouldn't want someone building a house for me if they weren't good enough at it that they could charge some money. -AL
Now obviously it was written tongue-in-cheek but I think there's more than a grain of truth to it.
Either way, more importantly I think, it has to do with th Rrroll up the Rim promotion, where there's a chance to win a car or 10g's, etc.
But obviously looking at it from a logical perspective, the chance is so miniscule that over the long term I am once again throwing away money. So why am I doing it? Am I just retarded? I hope not >.>
I'm thinking maybe it has to do with the fact that throwing away a small amount of money every now and then ($2 for a coffee or $2 for a lottery ticket) is far outweighed by the possibility, however remote, that I might win a cool million here or there (although more likely never)
Or maybe I'm just an idiot. I definitely can't justify the behavior from a logical point of view, yet I continue to do it occasionally And obviously I'm not the only one.
Ideas?
+ Show Spoiler +And for the record, I drink 1-2 cups of coffee every day, and I've yet to win a single thing from the Timmie's contest. Not even a free coffee or a donut. 1/9 chances my ass. xD
 
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You can't win without playing, you need to give luck a chance etc.
A few bucks spent on playing don't affect your life at all, while winning would.
You'll never become a millionaire with honest work, only by winning the lottery.
Disclaimer: I don't play.
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it's simple..just don't do it...problem solved
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I think it has to do with the fact that we cannot really comprehend the extrememly small (respectively large) numbers that these situations deal with.
I've tried to elaborate a few different ways without much luck so I'll just leave it at that.
Another reason is for the excitment. I think people play the lottery not just because they might win but because the enjoy the feeling that they could win and the excitment and eventual disappointment of losing. Though since you pretty well know you will lose the disappointment passes pretty quickly I'm sure.
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... I like Tim Horton's Coffee... with hot chocolate (I drink coffee a few times a month). If I had to choose I would go to Tim Horton's.
With respect to "Roll Up the Rim to Win" thingy, I think part of the joy/excitement is playing the game. I didn't even know the contest was going on until I went recently. I still buy coffee for the coffee, but this time I get to check for a prize which is fun to do in itself.
EDIT: what Zortch said. You have such low expectations, you get the thrill of playing the game without the disappointment of never getting any prizes.
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Logic is boring and not worth thinking about over once in a blue moon things like a $2 lotto
Gambling always owns
Doesn't apply to you, but McDonald's coffee sucks ass and I wouldn't take that shit free.
I think it only becomes illogical if you're buying the lotto tickets every day or something stupid like that.
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No, we do things based on the value they hold for us. Money just happens to be a representation of that value.
$2 isn't of significant value for you on an occasional basis, so whether or not you lose it doesn't really matter. Knowing that if you'd be unwilling to repeat an infinite number of times is different, though, because you value the grand sum of that money more than the $2.
Yes, there's also an inherent distrust in accepting something that is free as well - but only in that we COULD pay for it. It feels like either 1) they have some sort of hidden agenda, or 2) that we're stealing. In which case the coffee serves purpose #1, in that the free coffee will hopefully encourage you to buy their food that will go well with your coffee.
Altruism is similar - we donate money to Haiti because we value the ideas behind providing relief, though not we don't necessarily have any family or friends there.
So, in short - it's perfectly acceptable to spend $2 on a lotto ticket knowing that it doesn't really matter. But if you care more about putting together every last cent into something you really value, then I suppose looking at these things will help.
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one time my family and i was invited to this one concert thing that was held at a casino. so we hung around the casino beforehand and my dad gave my brother and i some money and told us to go have fun. so we went to this one cafe and sampled fudge, struddels, muffins, cookies, and other cool stuff.
people do stuff cuz at the time it's fun and pleasurable. some people have fun by playing slots and poker and whatnot at the casino, and also get the chance to win a few bucks. i know i wouldn't really have the much fun doing that, and i'd rather eat some good food  so there we went. maybe for someone else, the money would've been better spent gambling because he'd find more pleasure in that than eating cake and cookies.
the feeling of "oohh i juuust might win this time" overcame your logic for those few moments.
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Katowice25012 Posts
What it essentially comes down to is that people's actions are mostly governed by emotion, and not logical facilities. We tend to pride ourselves on being "the most rational beings around" but a lot of more recent evidence points towards a different perspecctive, I'm talking both in social experiments as well as what we know of the brain though imaging techniques. I highly recommend Dan Ariely's work, its a great intro to the subject and he is a pretty cool dude (who I think is still doing a speaking tour around North American colleges).
If you ask Daigomi nicely he can give more recommendations on similar work as well, he is pretty well read on the subject.
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Well as a *cough* proud Tim Horton's Employee I can definetly see the increase of sales that Roll up brings, even with McDonald's competition. I think a lot of it has to do with brand loyalty in this case. There are lots of "regulars" who come through in the same fashion, ordering the same thing irregardless of Roll up (you in this case), and I think the McDonald's promotion is a non-factor because once it's over you will return to Tims again (most likely)- so why switch for a few weeks, especially when you have the chance to win something? I agree with there being some cultural stigma about free stuff. I mean if all you want is a coffee, it feels awkward to go and just get a free coffee and leave, well to me anyways. It would feel... cheap, or something. If you have any Tims specific questions, ask away.
Also where do you live? $1.86 for a coffee, you're gettin' ripped off 
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On March 10 2010 04:17 emperorchampion wrote:Well as a *cough* proud Tim Horton's Employee I can definetly see the increase of sales that Roll up brings, even with McDonald's competition. I think a lot of it has to do with brand loyalty in this case. There are lots of "regulars" who come through in the same fashion, ordering the same thing irregardless of Roll up (you in this case), and I think the McDonald's promotion is a non-factor because once it's over you will return to Tims again (most likely)- so why switch for a few weeks, especially when you have the chance to win something? I agree with there being some cultural stigma about free stuff. I mean if all you want is a coffee, it feels awkward to go and just get a free coffee and leave, well to me anyways. It would feel... cheap, or something. If you have any Tims specific questions, ask away. Also where do you live? $1.86 for a coffee, you're gettin' ripped off
I live in Trawna 1.86 = large french
And if you want to talk about ripped off.. starbucks 2.46 for a medium vanilla hazelnut? what is that..
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South Africa4316 Posts
Problem with cognitive biases is that they are insanely persistent. In experiments, most of the biases remained even when the biases were explained to participants beforehand; even when participants were offered money for being accurate, the biases still persisted!
The whole bounded rationality paradigm seems to imply that, given the right circumstances, humans make decisions that are open to bias. This doesn't mean that the decisions are irrational, they are rational in most situations, but they are subject to bias given specific conditions. For example, when faced with limited information, we make assumptions which generally hold true. "I do not know how good the coffee is. In general, the more expensive a product is, the better it is. I will pay more for an expensive cup of coffee." Now, most of the time this works. Most of the time, a burger you pay money for is better than a free burger someone gives you on the street. It doesn't work, however, when people purposefully charge more for their burger specifically to misuse that kind of decision making.
Some of the most interesting food studies were done on wine, a perennially difficult thing to judge. Studies have shown that tasters rate the same wine considerably higher when it is more expensive. Even more interesting, another study did research and found that the average consumer prefers cheap wine over expensive wine by a considerable margin. In the end, it just comes down to the fact that nothing we do is done in a vacuum. We don't just drink wine, we drink wine knowing the price, and knowing how it makes us feel to drink expensive wine. We don't just buy a lottery ticket because we believe we'll win, otherwise conditioning will teach us very quickly that buying a ticket is not worth it. Instead, we buy a lottery ticket because of the way buying the ticket and waiting for the results make us feel.
Another bias I can think of now that is quite interesting is the Goldilocks effect. Organisation's usually sell products at three price-levels: entry, which is insanely cheap but generally quite shit; elite, which is insanely expensive, but the best product; and middle, which is reasonably priced and has most of the features a consumer would want. The reason its called the goldilocks effect is because of the "too much; too little; just right" effect this has on our behaviour. When products are priced like this, customers are willing to pay considerably more for the middle product that they are willing to pay for it if it is sold on its own. To make matters worse, the most expensive product, which is priced absurdly high specifically to make the middle product sell more (think 1st class plane ticket, or the $5000 laptop), then still sells, because consumers try to distinguish themselves from the average consumer by buying it.
I'm doing my masters on these topics, and I really couldn't be happier. It's awesomely interesting!
EDIT: On March 10 2010 04:06 heyoka wrote:
If you ask Daigomi nicely he can give more recommendations on similar work as well, he is pretty well read on the subject.
Haha, that happened while I was typing :p
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FREEAGLELAND26782 Posts
I don't gamble at all (for real stakes), though I don't frown upon it. Friendly games with Poker chips and whatnot are entertaining, and nonsensical bets with trivial "awards" are okay, but I don't see the need to tempt the odds. Things that involve gambling, such as poker and the lottery, run on odds that are inherently unfavorable to the player in the long run, else these establishments would not exist.
I think we, as humans, just tend to think less about the odds and more about "what if," no matter how slight the chance is.
And about free stuff, my Asian tendency tells me that "free is free. If it does meet up to your expectations / you don't like it / whatever, it's still free." Economics tells me there's no free lunch. However, if it's free to me, then it's just... free.
Humans are funny creatures.
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Social pressure too, maybe. In your example, people think McDonald's coffee is worse than an actual coffee brand.
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On March 10 2010 05:14 il0seonpurpose wrote:
Social pressure too, maybe. In your example, people think McDonald's coffee is worse than an actual coffee brand.
Timmy's coffee is substantially better than McDonald's, and is more a part of Canadian culture.
Also, a Starbucks coffee tends to be more expensive because of the classier environment and frankly better coffee. The flavour is much more pleasant than Timmy's.
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Sometimes a game of chance is fun in and of itself. You get to have your emotions played with for a bit, which given a long history of art is something we know everyone enjoys.
That said, lottery/roll up the rim, whatever is so painfully simple and boring that it doesn't make any influence on me.
If there were a button I could press, that had a 1 in 100 trillion chance to make me 10 million dollars, I wouldn't even press it once. Some people I asked that to said they'd probably press it for a few hours. I figure it'd be more fun hoping for someone to want to buy my shoes for 10 million dollars than to waste my time pressing a button. And by more fun I mean still not fun at all. Something about simple minds
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Korea (South)17174 Posts
people like you do illogical things because they entertain you and have no real negative impact on your life that you can feel (even though you know it's dumb)
most people do illogical things because they don't realize what they are doing is illogical (or negative EV like buying lottery tickets)
people get by day to day in their miserable lives by looking to the future or hoping for something more (ala religion, or hoping they win the lottery)
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On March 10 2010 03:36 JeeJee wrote:
Why do people buy lottery tickets? More specifically even, why do logical and smart people buy lottery tickets? Just the other week, I chipped in $2 for our lotto max pool, knowing full well that I'm losing money by doing it. That if I were to do it an infinite amount of times, I'd end up in the red.
I've been wracking my mind around this, and it's not being helped by the fact that just a little while ago, I went to grab a coffee and instead of walking 1 minute to get a free one from Mickey D's, I walked for 6 minutes to the nearest Timmies to pay $1.86 for basically the same coffee (at least I can't tell the difference, not a connoisseur). Partly I guess it has to do with the fact that I don't trust things that are free (since if they were any good they'd cost money)
How is this illogical at all?
The value you gain from purchasing the lottery ticket isn't fully measured in $$$. By a pure EV analysis you lose but some things like the small indulgence in scratching a lotto ticket every now and then or the hope that you'll hit the big jp isn't factored in.
Same with the coffee. You take the extra walk and pay the extra money for the peace of mind that you aren't drinking something questionable.
If people just measured things based on monetary value, no one would buy insurance. I'm no economist, but I know you need to factor in utility as well and realize that you're paying for more than just the dollar return.
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EPT
