TOK – Bad Decisions

One fault in our reasoning that Dan Gilbert mentioned was our tendency to try save money on lower priced items however ignore the same absolute value in possible savings when spending money on pricier items. I think that I have experienced this scenario before where I try to save some money when ordering a meal or buying a drink at a store however when I choose to buy something more expensive such as shoes or perhaps a technological device, the savings are less important. This is faulty logic because essentially the extra money spent on the more expensive item outweighs the money saved on the lower price item and since money is fungible there is essentially no difference.

The reason I think people fall into this sort of faulty logic is because they think about money in terms of a percentage. Saving 50 cents on a dollar item is a 50% savings however saving 1 dollar on a 200 dollar item is only 0.5% savings which is 100 times less but 2 times more in absolute value.

Interesting to think about.

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