Paying for vacations

[From Mike Acree (970609.1058 PDT)]

Bruce Gregory (970605.1700 EDT)

In the July issue of the MIT Technology Review there is a brief
piece about Drazen Prelec of the MIT Sloan School of Management.
He argues that there is a "kind of 'moral tax' that we incur
when we pay for something. When you purchase any good, your
enjoyment is reduced by the psychological cost of paying for

On the other hand, I can imagine some people getting more enjoyment out
of a tie if they paid $100 at Needless Markups than if they found it in
a Goodwill bin for 15 cents. (I think Rick has referred to a similar
phenomenon as the Giffen effect or something.)

apparently we don't mind paying for something as long as we are
benefiting from it, but don't like to pay for things (like
vacations) after they are "gone".

There are still more variations. Amos Tversky once had a student who
said that if she passed a certain important exam, she was going to
celebrate with a trip to Hawaii. If she failed, she was going anyway,
but as a consolation. However: so long as she didn't know whether she
passed or failed, she was unwilling to commit to buying the ticket.
Intrigued by this violation of Savage's axioms for consequentialist
decision making, Tversy of course published several papers on it.