March 17, 2008
People More Easily Convinced To Spend Time Than Money?

Are people less easily influenced to spend more or less money than they are influenced to spend more or less time?

In a series of experiments, Ritesh Saini (George Mason University) and Ashwani Monga (University of Texas, San Antonio) demonstrate that a qualitatively different form of decision making gains prominence when consumers work with time instead of money. Specifically, consumers thinking about expenditure of time are more likely to rely on heuristics: intuitive, quick judgments based more on prior experience than on analysis of the information presented.

For example, one experiment had participants consider the purchase of a used car. They were told that a search on a used-car website had yielded 80 cars meeting their criteria but that viewing each accident record would take either $1 or 5 minutes of time. They were then asked how many records they would like to view, with a catch: the researchers used classic experimental “anchoring” techniques to manipulate the answers.

Participants were asked whether they would view “up to 2” or “up to 40” records, before indicating the specific number of records they would view. The use of an anchor, for those thinking in terms of time expenditure, turned out to have a significant impact.

When the anchor value was high in the time condition, consumers chose to view an average of 23.7 accident reports, versus 9.1 when the anchor value was low. The number of records consumers in the money condition chose to view was statistically the same, irrespective of whether the anchor value was high or low.

“People face difficulties in accounting for time because they do not routinely transact in time as they do in money,” explain the researchers. “Although people in some professions (e.g., lawyers) do keenly monitor their time expenditures, most other people are not trained to do so.”

Does this line of reasoning sound correct to you?

Look at people in office settings. I see them waste each others' time on a daily basis. Seems that it is more easy to get people to waste time than money.

How easily one can be influenced to spend money depends on whether one is a tightwad or a spendthrift. Surprisingly the tightwad's spending habits are more easy to influence.

Whether one is a spendthrift or a tightwad also predicts a wide range of spending behavior, the researchers found. Spendthrifts are no more likely than tightwads to use credit cards, but spendthrifts who use credit cards are three times more likely to carry debt than tightwads who use credit cards.

Annual income differs little between tightwads and spendthrifts, suggesting that the observed differences in debt are largely driven by differences in spending habits.

Interestingly, the researchers also found that tightwads are also most sensitive to marketing ploys designed to reduce the pain of paying. In one experiment, participants were asked whether they would be willing to pay $5 to have DVDs shipped overnight. The cost was either framed as a “$5 fee” or a “small $5 fee.” Spendthrifts were completely insensitive to the manipulation, but tightwads were 20 percent more likely to pay the fee when it was less painfully presented as “small.”

When offspring genetic engineering becomes possible will more people genetically engineer their kids to be tightwads or spendthrifts? Will they make their kids less likely to waste time?

Share |      Randall Parker, 2008 March 17 11:03 PM  Brain Economics


Comments
cancer_man said at March 17, 2008 11:07 PM:

excellent post.... a big psychological role is in play.

Brett Bellmore said at March 18, 2008 3:53 AM:

I don't consider time and money interchangeable in my life because... I can't freely interchange them. I'm on salary, and have few to no opportunities for moonlighting. Even hourly employees can't just up and decide, "I think today I'll work a couple extra hours!".

So I often wind up spending time on something where far less than my usual hourly rate would by the something much quicker. 'Cause I don't HAVE that money, or the option of trading that time for it.

Really, only people in a few select lines of work, and the self-employed, are in any position to freely exchange time for money, and thus rationally regard them as equivalent.

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