Friday, February 15, 2008

Answer to Economics Quiz

There is no clear answer to the last quiz "Who would you be Mr. A or Mr. B?". In our poll, people desired to be Mr. B twice as often as Mr. A. However, in large studies conducted by researchers, most people say they would rather be Mr. A. They would rather forgo $50 to alleviate the feeling of regret that comes with not winning the thousand bucks. This goes against one of the biggest myths in all of psychology and economics, known as Homo economicus. This theory states that Homo sapiens acts to obtain the highest possible well-being for himself given available information about opportunities and other constraints, both natural and institutional, on his ability to achieve his predetermined goals.

But, in fact, human beings are all irrational and emotional in economic matters as they are in most other aspects of their lives. Like our primate cousins (see previous post for more on primates), humans so dislike the feeling of regret that we’ll pay to avoid it.

I, for one, voted that I would rather be Mr. A. For me, the regret of missing the opportunity to be the 1 millionth customer and get $850 more dollars would outweigh the fact that Mr. B got $50 more than Mr. A. Being Mr. A, you are the only winner. There was no potential to gain more by having acting differently (except for going to the other theatre that was paying more for the millionth...but for the sake of this quiz, we assume Mr. A did not even know about the other theater that Mr. B attended).

To me, it all comes out to the theory that 'you can't miss what you never had'. In Mr. B's scenario, I could've had a lot more money if I had just left my house 20 seconds sooner, or driven there just a little faster, or made it through one of the yellow lights on the way. Ugghhh, that would drive me crazy. However, being Mr. A, I would be happy that I had $100 more than I expected when I left the house. Rationally, I know that $150 is better than $100 straight up, but I cannot eliminate emotionality out of my reasoning (but apparently 2/3rd of the voters in our poll can do so).


Bob said...

Coca, you are a mess. I wonder if the people who voted to take $100 were just voting that way because they thought it was so obvious that there must be a catch.

kath said...

I was totally with you on this, Coca...I preferred to only know about my own good fortune than what could have been

julie said...

This is a terrible problem when you work in my field. Even when you're doing well by all accounts, your clients, by definition, are still doing MUCH MUCH better than you are.