February 21, 2022

Why do people sometimes act against their own interests?

This happens at the business level as well as the individual level. Examples:

  • Coffee places sometimes use Medium, Large, and Extra-Large’ as their size taxonomy instead of the conventional Small, Medium, and Large’. I assume this is because they think it makes it seem to customers like they are getting more coffee for their money, and therefore it’s a good deal. - I think this strategy might backfire. Usually, I don’t think too hard about what size I want and will generally blurt out regular’ or medium’. If a store uses the Small, Medium, Large’ scale, they’ve just upsold me! If they use the Medium, Large, Extra-Large’ scale, then I’ve just bought the very cheapest option. If lots of people are like me, I would expect this effect to out-weigh any perceived good-deal’ effects.
  • Apparently firms overpay for online ads despite evidence they don’t work