The seeming irrationality of the customers choice may disappear after the cost of decision-making is taken into account.
In our daily life we are constantly required to estimate trade-offs between things that are very difficult to quantify (e.g. pleasure of wearing a new jacket—money that has to be paid – extra hours of work to earn this money - …). Hence using simple subconscious heuristics (such as “improving the trade-off by 50% is worthy of your time, 5% is not”) is very helpful. A constant search for an optimal solution would make a nightmare out of our every decision, which is hardly worth an occasional 5$ saving.
In this specific example, I believe that increasing the price differentials would have justified an additional mental effort, leading more people to the “optimal choice”.
The seeming irrationality of the customers choice may disappear after the cost of decision-making is taken into account.
In our daily life we are constantly required to estimate trade-offs between things that are very difficult to quantify (e.g. pleasure of wearing a new jacket—money that has to be paid – extra hours of work to earn this money - …). Hence using simple subconscious heuristics (such as “improving the trade-off by 50% is worthy of your time, 5% is not”) is very helpful. A constant search for an optimal solution would make a nightmare out of our every decision, which is hardly worth an occasional 5$ saving.
In this specific example, I believe that increasing the price differentials would have justified an additional mental effort, leading more people to the “optimal choice”.
Good point. It’s worth noting that those heuristics can use dollar values as well, although percentages are more cognitively natural.