Image for post
Image for post
(featured image credit: Ramesh Ram CC BY)

An accidental (behavioural) economist on vacation (again)

The economic way of thinking is a bit like being a small child: asking ‘why’ all the time. Even on holiday…

Maybe one day your correspondent will have observed nothing worth reporting on when on holiday. But it won’t be this year: read on for yet another small collection of vignettes of intriguing human behaviour, seen through the sunglasses of an accidental (behavioural) economist who cannot help wondering why at his own behaviour and that of others.

It began weeks before the actual trip. While completing the booking of our ferry crossing, the site helpfully asked whether I would be interested in paying £10 (each way) extra for priority embarkation and disembarkation. Why would anyone spend this money?

A simple question, concealing a rather complex reality. Let’s start with a System-2 perspective, using logic and reasoning to work out the actual benefits, and whether they would represent a good use of £10 (each way).

Clearly, speed would be one. During embarkation, it would give a traveller the chance of finding a suitable spot on the ship before the crowds arrive, and at the other end it would ensure minimal queuing leaving the port (which, in Dunkirk, can be tricky). But how much time? Probably about no more than 15–20 minutes. There is an opportunity for some System-1 thinking to slip in here, with an effect called intertemporal discounting. Would you pay £10 now, so you can be on your way in 505 hours and 40 minutes from now, instead of in 506 hours? That doesn’t quite feel substantial enough to spend a tenner on (about the price of three coffees on board).

Image for post
Image for post
A tenner to avoid queueing here? A real bargain! (photo: Mike Norton CC BY)]

But still, some people do it — I see it every time I take a ferry: a dozen or so cars are let on first, parking right in front of the exit ramp, a big sign behind the last one indicating these are priority places. The ferry company, of course, knows about scarcity — even though the demand is almost always smaller than the capacity, they were not shy, when I was making the reservation, to point out that priority places are limited.

Is that what is behind it? Perhaps. Then again, the time saving that looked small three weeks ago doesn’t feel so insignificant when you’re queuing to drive on board, or worse, when you’re queuing to get on the road after arriving. If you really thought about it, it might still not justify the £10, but it definitely feels more worthwhile than at the time of booking. And there is of course the intangible benefit: yes, you would save a handful of minutes, but you would also be among the first to disembark. If you’re easily frustrated by the wait getting off the ship, that’s a strong, memorable emotion. People with a good memory of earlier experiences may well be swayed by this line of thought, even weeks before the actual journey.

Still not convinced of its value? Here’s another way of looking at it. Imagine you arrive at the port, with 200 vehicles ahead of you. You are given the choice of either free priority status, or a £10 cash discount on your ticket price. I suspect even I might be tempted to opt for the status and the time saving, rather than for the money back in this case…

One of the many traditions during our annual summer trip to the home country is a visit to a (locally) famous seafood restaurant. It is quite a peculiar place — on its own, well off the beaten track (walking there from the town centre, will take you nearly 30 minutes). Mussels ‘nature’ (just cooked in water and vegetables, no fancy stuff) are about a third dearer than at typical establishments in town. Worst of all: they’re served with bread, rather than with frites — this Belgian (!) restaurant manages to not serve fries at all. Then surely it has to be very posh inside? A place where the house wine costs 23 euros (about £21) for a bottle must be quite something, surely. Well, no: the place is really a huge old shack, with shared tables arranged like in a school refectory, seating around 150 people. Not a hint of candlelight or free amuse-bouches. Yet the flagship item on offer, prominently displayed on the menu, is the grand-sounding Plateau Royal, a large seafood platter for two with a Canadian lobster and a bottle of champagne, a snip at just under 150 euros (£135). They certainly know how to do anchoring.

Image for post
Image for post
This must be an incredibly good restaurant!

Why would people come here, and queue up outside in the rain for up to half an hour to enjoy the somewhat overpriced delights in distinctly modest surroundings? The place has a reputation — in a category of its own. The quirks are piled on top of each other (no meat, no fries or potatoes of any description, open only between 6 and 8.30pm, cannot book ahead, idiosyncratic interior and so on) making it hard to compare it with anything else. It may be bad news for anyone who doesn’t eat seafood, but that’s a price they’re willing to pay. Seafood (especially shellfish) tends to be more expensive than meat or vegetarian dishes anywhere, but if everything is seafood, everything on the menu is pricy, again making rational comparison harder.

The daily queues of guests (on one visit I counted over 100 people) reinforce the message that it must be superior: what better way to provide social proof? And nobody would, of course, admit their meal it was just meh, if they had been waiting for a table for over 20 minutes. We are pretty good at saying whether something is better or worse than something else, but if there is nothing to compare with, we are prey to rules of thumb. And these all suggest that this must be an excellent restaurant, otherwise nobody in their right mind would go there. Genius!

On the Sunday morning I strolled over to the baker’s for some delicious boterkoeken, a Belgian breakfast delicacy made with puff pastry and, you guessed it, butter (a bit like croissants, but much better). It was barely 8.30 but the shop was already bursting with customers, and outside in the morning sun there was a queue of about half a dozen people (social proof again!). Intriguingly, every time someone came out, the first person in the queue immediately squeezed themselves into the store. This not only maintained the packed conditions inside, but also increased the chance that someone would be served out of sequence (neatly queuing does not come natural to Belgians; queue jumping, unfortunately, does). Why would people want to exacerbate this situation?

Imagine the situation before the queue forms: just a handful of customers in the shop. It gets busier and busier, and still people enter the store. At what point will the next customer decide to wait outside? A queue of one looks a bit silly, so there is a natural tendency to go inside rather than to start forming a queue when there is nobody else. “There is always room for one more,” we think, so the store gets really packed before the queue eventually starts to form. And it remains full: one customer coming out means there is definitely room for another one to go in.

There is probably even more to it than this. Pastries are, eventually, scarce goods on Sunday mornings — be late, and you’ll have to make do with plain rolls instead. So actually being inside, the desirable goodies within reach, gives us the idea that we’re closer to getting it than outside behind the shop window. If you’ve ever had Belgian breakfast pastries, you’ll know this is a powerful motive, however illusory.

Online trading of used goods has taken the world by storm since Craigslist and eBay arrived on the fledgling internet scene in the mid-1990s. With small ads you could only reach people living nearby, but now your entire country is your marketplace, if not the whole world. And it is not only the massive increase in both supply and demand base that is behind the success of online trading: the whole process, from searching for items, to buying and paying for them, and eventually obtaining them is in general a lot more efficient. Yet there is still a lot of offline trading going on. Why do people still make that effort?

Another of the recurring activities of our annual trip is a visit to the ‘International Flea Market’ of Oudenburg, a small town just inland from Ostend. The name of the event seems a little grandiose, but it does attract people from abroad: France and the Netherlands are just 25 miles away, and many foreigners on holiday tend to drop by. Some of them come well prepared and organized: every year, you can see people pulling shopping trolleys or even small carts so there’ll be no bargain they’ll have to say no to. Others just walk around awkwardly carrying the large objects they got for a song.

Image for post
Image for post
Meatspace also has its pluses

It’s not my kind of thing, and while my companions roam the nearly 2km of streets lined with well over 500 stalls, I sit down somewhere with a cold beer and a book, but not before having a look around as well and soaking up the atmosphere. And it is not hard to see the attraction of meatspace trading compared with the online equivalent. There is the general human-to-human interaction, and the opportunity for face-to-face negotiation, often interesting to observe when buyer and seller do not speak each other’s language. There is the very visual display of utter abundance, much more powerful than what an online platform can achieve, even if these have undoubtedly an order of magnitude more items on offer. And there is the profound serendipity of a huge flea market, displayed in glorious disorganization. Who needs everything arranged neatly in categories, if you enjoy the surprise of the unexpected discovery of an item you didn’t even realized you missed?

Efficiency is not the only thing that matters, and there are plenty of reasons why we should not expect the demise of the flea market just yet — although there is one aspect it shares with online market places: the network effect. Both thrive because more people, both sellers and buyers, attract even more buyers and sellers.

When you look around you, on holiday or not, with sunglasses or without, there is a lot of behaviour that raises the question why? And more often than not, it’s (behavioural) economics that comes up with the answer. We truly are economic beings.

Originally published at http://koenfucius.wordpress.com on August 23, 2019.

Thanks for reading this article — I hope you enjoyed it. Please do share it far and wide — there are handy Twitter and Facebook buttons nearby, and you can click here to share it via LinkedIn, or simply copy and paste this link. See all my other articles featuring observations of human behaviour (I publish one every week) here. Thank you!

Written by

Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store