Relativity Plays a Role in Financial Life Planning, and in this Case in Financial Retirement Planning Goals in One of the Best Home Businesses

My husband and I had been waiting a long time to get a flat screen television set. It is on our list of items we want to purchase thanks to our owning one of the best home businesses, and we wanted it before we retire, it is part of our financial retirement planning goals.

The thing that appealed to me the most is that flat screen tv’s take up less room than our old heavy, bulky television set.

My husband liked the larger viewing size of the flat screen, even in the same 32” size, the flat screen could been seen from a side angle, but the old tv you could not.

We wanted to get the best price possible, so we waited and waited. Finally, a model was advertised in the size we wanted and at a much lower price than usual. Three hundred and ninety-nine dollars, and if we purchased on a Tuesday, another 10% off that.

“In a series of illuminating, often surprising experiments, MIT behavioral economist Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. Blending everyday experience with groundbreaking research, Ariely explains how expectations, emotions, social norms and other invisible seemingly illogical forces skew our reasoning abilities”… Harper Collins publishers.

We went to two different stores in the same chain of stores that Tuesday and they were both out of the sale item, but we were tired of waiting.

We looked at several models in the size we wanted. Three models were $499., another was $599. We looked at the less expensive ones and there didn’t seem to be any difference, except for one model was marked down a lot more than the other two.

We decided on the one that was marked down more, even though we did not notice any discernable differences in the picture quality or features.

Our author says that, in the relatively new field of study “behavioral economics” or “judgment and decision making” (JDM), we compare items to decide which one we want, and that we compare the relativity of the price to the item in savings.

This real life example demonstrates a few points that are explained in Chapter One of Dan Ariel’s “Predictably Irrational”.

In the next post, we will learn another point or two that he makes.

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