The Irrational ConsumerJul 17, 2007 · psu · 6 minute read
There is a prevailing line of thought in the circles of economic theory that consumers will act in a manner that is in their best interest. This is the idea of a rational consumer. The notion is that consumers will evaluate the choices given to them in a manner consistent with logic and reason and the pick the choice that maximizes whatever it is that consumers want to maximize. Not being an economist, I’m sure I’m doing violence to their elegant theoretical thinking. The trick to making this idea work must be in defining the function to be maximized in a clever way. After all you don’t need to look too hard at how people buy games and gaming hardware to throw out the idea that they are acting rationally.
I think the behavior of the average consumer is more complex than a cold state machine driven only by logic and carefully calculated utility functions. I come to this conclusion based on extensive study of a consumer that I know very well, me. Generally, my state of mind about purchasing any given item goes through three phases:
1. I don’t know what it is.
2. I know what it is, but the BUY IT bit has not been flipped.
3. The BUY IT bit has been flipped.
The two interesting states are obviously the last two, and the interesting question is how this magic bit in my head gets flipped. Before the bit flips, I am perfectly capable of making a completely reasoned and logical decision. I can take on a detached demeanor, and compare all the choices at hand without any regard to my shallow emotional problems. For example, the rational-me will be able to trumpet the idea that one should wait (say) two years before buying a new game console, because then the library will have filled out and games will be comparatively plentiful and cheap. There are always plently of games to play until the new stuff comes around. Waiting on the new console avoids that empty period between launch and when the good stuff finally comes out. The rational-me comes to this conclusion and everything goes smoothly.
But then the bit flips.
The bit flipping is a strange and unpredictable event that is not really tied to any sort of physical reality. The state of the external world before and after the bit flips is usually pretty much the same, although I will try and come up with retroactive rationalizations for why the bit flipped. For example:
Well, ya know, Obvlivion came out, so it was time to get the new Xbox.
The Wii is the hot new thing! It’s so innovative!
The truth is, I saw an Xbox 360 at the Best Buy, and the bit flipped. I still haven’t figured out why the bit flipped on the Wii. I think it had to do with an inner delight that Nintendo was finally giving Sony a bit of payback. In any case, once the bit goes over, the purchase is made. Having had some experience with this behavior, I can usually tell when my state of mind on something is about to flip over. I get a little tingling sensation in the back of my head, just under the skin. It’s especially strong if I happen to see the item in the store. This is the usual sign that I should make sure I have room on my shelves, money in my bank account, and that certain parties in the household have been properly informed. I now know to make these kinds of arrangements no matter how ludicrous the particular purchase is on any rational level.
The astute reader will have figured out where this is going.
I had been following the saga of the PS3 as a mostly detached and amused obvserver until last week, when they finally dropped the price, then didn’t drop the price, then said they were phasing out the current model, then said they weren’t, then said they were. This would have just been one more notch in the soap opera, but something about the price drop pushed my inner bit about halfway over. There was a tiny little voice inside my head trying to tell me that I needed to get the machine before they took out the PS2 emulation hardware. This is, of course, nonsense. I have a perfectly good PS2 emulator sitting on the shelf under my TV. It’s a PS2.
But then it happened. We had to cancel our long weekend in Toronto because of another failure with our piece of shit Chrysler car. Faced with a whole weekend at home rather than basking in the dim sum and sushi, my fragile inner defenses collapsed and allowed the bit to flip the rest of the way over. This did not upset me. I saw the warning signs. As before, the bit was not controlled by rational forces but I was ready for it. I had allocated the necessary mental and monetary capital. What came next is what upset me.
I looked around my local city for one. There were many to be had, but there was a problem. The Exchange had a used machine and some used games. But I didn’t want a used machine, I wanted shiny newness. The local Target had the machine, but it did not have the game I wanted or the HDMI video cable that is the best way to hook the machine up to the TV. Best Buy would probably have the machine and the game, but a quick check on their web site indicated that they would only sell me an HDMI cable for approximately 10x the cost of what I could get on the web at monoprice. So I ordered the cable from monoprice and the machine from Amazon.
This, I say, is the truly irrational consumer at work.
I should explain. The HDMI cable I bought costs $5. This means the one at Best Buy costs about $50 or a bit more. This is less than 10% of the total purchase price of the item that we are talking about (PS3 plus one game). In order to avoid this staggering cost, I ordered the PS3 at Amazon instead, and am waiting four entire days for the machine to be delivered to me rather than overpay for the cables. I could have just bought the PS3 at the Target and used it with the crappy cables until the good ones came, but I didn’t think of that because my brain was fogged by the “anal-retentive dork will not get reamed” syndrome. So I one-clicked on Amazon instead, and I was instantly afflicted by “Amazon remorse.” This is when you realize that for the next four days you’ll be reloading the status page on your Amazon order instead of unpacking and playing with the PS3.
The irrational consumer is a really stupid and hateful beast. At least Amazon is sending me a free movie (Resident Evil Apocalypse) and remote control (a $25 value!).