Real-life example (recently happened to me): you order a nifty new gadget at bargain prices from a foreign ecommerce site that ships worldwide. They ding your credit card and ship the item. Here’s the catch: you forgot that imports are often subject to customs and other kinds of taxes, often apparently capricious and arbitrary. People find out when the delivery shows up at their door, and they’re faced with the choice of paying the extra tax or giving the item up.
How to work this into a class simulation: make the disclosure of the extra amount gradual instead of sudden; introduce elements of chance to the accumulating amount (e.g. “your item was recently classified as hazmat, with a 5% extra fee for safe handling”); crucially, have the final tax amount sometimes exceed the item’s original price.
Sunk cost psychology predicts that people will prefer forking out tax, over giving up on the item and keeping the money to purchase a new one.
This can be done demo-style (ask who would give up at various points by show of hands), group or individual exercise.
Real-life example (recently happened to me): you order a nifty new gadget at bargain prices from a foreign ecommerce site that ships worldwide. They ding your credit card and ship the item. Here’s the catch: you forgot that imports are often subject to customs and other kinds of taxes, often apparently capricious and arbitrary. People find out when the delivery shows up at their door, and they’re faced with the choice of paying the extra tax or giving the item up.
How to work this into a class simulation: make the disclosure of the extra amount gradual instead of sudden; introduce elements of chance to the accumulating amount (e.g. “your item was recently classified as hazmat, with a 5% extra fee for safe handling”); crucially, have the final tax amount sometimes exceed the item’s original price.
Sunk cost psychology predicts that people will prefer forking out tax, over giving up on the item and keeping the money to purchase a new one.
This can be done demo-style (ask who would give up at various points by show of hands), group or individual exercise.