Seems like the problem is that in real life people are not perfectly rational, and also they have an instinct to reciprocate when they receive a gift (at least by saying “thank you” and not throwing the gift away).
In a world where Bob is perfectly rational and Tim has zero expectations about his gift, the situation is simple. Previously, Bob’s choices were “spend $300 on good headphone”, “spend $100 on bad headphone and $200 on something else”, and “spend $300 on something else”. Tim’s action replaced the last two options with a superior alternative “use Tim’s headphone and spend $300 on something else”. Bob’s options were not made worse.
But real people are not utility maximizers. We instinctively try to choose a locally better option, and how we feel about it depends on what we perceive as the baseline. Given the choice between 10 utilons and 3 utilons, we choose 10 and feel like we just “gained 7 utilons”. Given the choice between 10 utilons and 9 utilons, we choose 10 again, but this time we feel like we just “gained 1 utilon”. Given the choice between 10 utilons and 10 utilons of a different flavor, we might feel annoyed about having to choose.
Also, if Tim expects Bob to reciprocate in a certain way, the new options are not strictly better, because “spend $300 on good headphone” got replaced by “spend $300 on good headphone, but owe Tim a favor for giving me the $100 headphone I didn’t use”.
Seems like the problem is that in real life people are not perfectly rational, and also they have an instinct to reciprocate when they receive a gift (at least by saying “thank you” and not throwing the gift away).
In a world where Bob is perfectly rational and Tim has zero expectations about his gift, the situation is simple. Previously, Bob’s choices were “spend $300 on good headphone”, “spend $100 on bad headphone and $200 on something else”, and “spend $300 on something else”. Tim’s action replaced the last two options with a superior alternative “use Tim’s headphone and spend $300 on something else”. Bob’s options were not made worse.
But real people are not utility maximizers. We instinctively try to choose a locally better option, and how we feel about it depends on what we perceive as the baseline. Given the choice between 10 utilons and 3 utilons, we choose 10 and feel like we just “gained 7 utilons”. Given the choice between 10 utilons and 9 utilons, we choose 10 again, but this time we feel like we just “gained 1 utilon”. Given the choice between 10 utilons and 10 utilons of a different flavor, we might feel annoyed about having to choose.
Also, if Tim expects Bob to reciprocate in a certain way, the new options are not strictly better, because “spend $300 on good headphone” got replaced by “spend $300 on good headphone, but owe Tim a favor for giving me the $100 headphone I didn’t use”.
Yes!