I’m sure we have all encountered someone who will spend money and time beyond what something is worth to get it if it is free, two examples I can think of.
Driving across town to eat free samples at a Sam’s Club or Costco on Saturday, hey free food! But wasting $5 worth of gas and time to do so.
Someone healthy with mild diarrhea going to the ER(in a country with universal health care) and waiting hours and hours in triage and taking time off work instead of spending a few cents on some immodium tablets. But hey it is free and you get to be seen by real medical professionals!
Is there a term or economics concept for this? Valuing something free over something not free, but wasting a lot of time and money to get it?
Doh, yea that is an obvious one, don’t know why I didn’t snap to it thanks.
In some cases I think the person isn’t realizing the big picture, like they only consider the cost of buying versus free and ignore everything else so free seems better. In other cases I think bragging about how frugal they are makes them feel better, even though they aren’t.
I was curious if economists or psychologists had a concept for this or if there were papers written on it or studies.
I wonder if there’s a psychological term for people who do this because they get a thrill out of getting something for free despite the ancillary costs. The same kind of person who won’t buy something unless they can dicker the price down, even if it’s only an insignificant amount, or they’ll knowingly spend the extra money to drive miles away just because they’re getting something for free instead of paying the owner for it. In a similar vein I know of both retailers and wholesalers who will throw product away before they ever sell them for a loss.
False economy is a good general term. Behavioral marketing has a whole slew of terms for this spectrum of behavior, but I can’t bring them to mind right off hand. (Of course, they are all terms of endearment in that field.)
I once heard this described as the “scarcity principle.” Free food is hard to find, but you can fill up your tank with gas anytime you want.
One explanation is that we evolved to take advantage of things that occur seasonally before we use things we have year-round. If berries are in season, you gorge on berries. The potatoes will wait. When you think about it from a hunter-gatherer perspective, it makes sense. Even if the berries are more expensive (in labor/effort) to acquire than the potatoes, failing to acquire them now means you’ll use the potatoes faster and starve this winter. Eat the berries now and save the potatoes for winter, no matter what the cost.
(Obviously, prehistoric people mostly didn’t have potatoes. Substitute your storable food resource of choice.)
It’s only in a modern setting that this way of thinking leads us astray. First, because other people can manipulate the impulse. Second, because nothing is really all that scarce anymore: failure to grab the free samples at Costco does not mean you starve this winter.
But I do know people who will seek out free things, even though they don’t actually want them. If someone is giving away samples at a fare, or some other public venue, I’ve seen people grab up things without even knowing what they are–just because they’re free. I think that gets at the issue more directly, because penny-wise, pound-foolish is often just a case of ignorance.
In the UK there is a problem with A&E being clogged up with people who shouldn’t really be there. I have known people with a headache sit for four hours only to be sent off with some paracetamol that they could have bought for 35p in a supermarket.
The ambulance service get calls on the emergency number from people who have dropped their TV remote or for other trivial reasons.
In the Hospital they have to deal with irate people who expect to be seen instantly regardless of the genuinely sick people patiently waiting.
The Something-for-Nothing society we live in I guess.
I know it doesn’t answer the question, but in your one example, if the free samples replace a meal, it could be cheaper than the gas to get there. Especially if you have several people in the car. But anyway.
I have to really fight the urge to drive further than needed for very small differences in the price per gallon of gas. I’ve gotten better, but there’s a strong pull on me even though I know it’s such a small difference. It’s silly, I know.
I talked to someone last week who drove 45 miles to my business, but forgot to bring a document that would save him $11.00. He decided to return in a week so he’d save the money. I honestly thought he was kidding around, but no.
In general I agree with your points. But the bolded part may indeed have a good reason behind it. Buyers and sellers are in a repeating game, not a one-time encounter. A seller that routinely fire-sales goods is training their customers to expect fire sales in the future. And inviting them to game the system to provoke fire sales.
A classic example is fast food outlets which have a bunch of premade food still on hand nearing closing time . If they got in the habit of giving it away or selling it for half price starting 15 minutes before closing time they’d quickly find themselves with almost no sales in the preceding hour, and a queue out the door at 0:14 before closing. Smarter to throw the food away today to preserve their last-hour sales over the entire future.
Obviously smarter yet to manage production to minimize end-of-day leftovers, but they can only do that so perfectly; this is discussing what to do with the inevitable overages despite their best efforts to optimize.
I think that’s exactly right for one wholesaler I know of. He’s a food supplier in a competitive market and I’m sure he thinks that if he let’s it go cheap just once for a customer they’ll be back demanding a better price the next time.
But I knew a retailer very well who was just a rotten bastard and couldn’t stand the idea of anyone getting a good deal on his dime. He ran sales when it suited him to boost business, but if there would goods he couldn’t move he threw them away. You could tell it was pathological with him because I suggested he give some paper goods away to a charity and he said he wouldn’t do that because they’d just try to hit him up for more donations. The same mindset as you mention, but no real business concern, just a miserly old crank.