Not Thinking About Money Has a Value All its Own

Contra Squarely Rooted, people absolutely want to be bonds.  He notes that most of the hot new businesses these days work on a subscription pricing model, where customers pay a flat fee rather than a la carte.  Often the a la carte option would be less expensive, but people are willing to pay a premium for not having to think about transactions.  One way to interpret this is that companies are exploiting consumers’ cognitive biases and that consumers are fools for paying more than they need to.  I don’t think this is a helpful way to look at it.

Choice fatigue isn’t some illusion that goes away once you know about it, choice fatigue is real because we feel it.  Personally, I hate having to think about microtransactions and paying for metered services.  It’s irritating and the irritation of constantly knowing I’m losing sums of money (albeit small sums!) far outweighs the comfort of knowing I’m saving small amounts.  And I’m obviously not the only person who feels that way, because consumers are voting with their feet.*  I think that the general dislike of a la carte pricing comes from natural loss aversion – which is to say people assign more emotional weight to losing a given sum (e.g., a microtransaction) than they get from gaining a given sum (the savings earned vs. fixed-fee pricing).  I’m frankly willing to pay a little bit more for a given fixed-fee service to not have to worry about what I’m actually spending.

I wish I wasn’t that way, but I don’t get to shape my own preferences and cognitive biases.  I think the trend towards fixed-fee services is best viewed as substantially enhancing overall welfare.  Consumers get greater surplus, providers get greater surplus (profits) – what’s not to love?

*: Or whatever the digital equivalent is.

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2 responses to “Not Thinking About Money Has a Value All its Own”

  1. squarelyrooted says :

    I suppose my post was a little ambiguous, because I don’t disagree with you one iota! I think the sentiment I shared in this post:

    http://squarelyrooted.com/2013/05/28/life-is-too-complicated-and-thats-a-public-policy-problem/

    Actually reflects on similar dynamics to this issue. I was mostly just noting the rapid rise of subscription services for the very reasons they are so appealing, and noting that more and more of our consumption going forward will likely be done that way, and trying to suss out the beginnings of what that means. But I’m not opposed, per se.

  2. thomasthethinkengine says :

    This helped me clarify my thinking on media. For a long time I believed in micro-transactions that would let writers make money. Now I’ve swung to the opposite pole. I think online news/comment sources should be marketed like cable TV – one payment gives you access to everything.
    Especially when you consider how we consume news now. Nobody relies on just one source, like the compendium journal that used to land each day on the front lawn. We want to read everything, but because each journal charges so much to subscribe, we can’t subscribe to everything we want to read. Not making money is not sustainable for these institutions.
    The cable TV bundle – access to everything from NYTimes to the Bangalore Mirror in one easy payment – would be institutionally chaotic, but from a consumer perspective you have to admit the appeal. And taking the consumer perspective is usually what makes ideas win in the end.

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