Dan Ariely on the Psychology of Money

Dan Ariely

Dan Ariely, James B. Duke Professor of Psychology & Behavioral Economics

The Pain of Paying: The Psychology of Money”

During this session, you will learn:

  • why paying with cash for a nice dinner feels worse than paying with a credit card
  • how AOL underestimated internet usage with a change in pricing structure
  • how to get maximum enjoyment from your vacation

Professor Ariely’s presentation took place in February 2013.

View Professor Ariely’s Bio

 

 

Pre-recorded Video

Live Session Recording

Comments
21 Responses to “Dan Ariely on the Psychology of Money”
  1. Dan Bethlahmy says:

    Really enjoyed the brief lecture and when you’re on Marketplace. A question/observation…Recently some stores began imposing here in NJ (and elsewhere) a 1-4% fee for the use of credit card. I’m curious if this would ultimately hurt the retailer. I’m wondering if consumers would pull back or reduce their consumption.

  2. Aegean BM says:

    Love the waiter scene. Love the graphics. Love the dynamic charts. I’m sure many days were put into 15 min of video. Kudos to you and your post production team on making a fascinating subject visually entertaining as well.

    The days of the traditional classroom are numbered. Media based education is just beginning. We’ll always need teachers, but do we really need all the lecturers we have today? Tape the best, and reassign the rest.

  3. Does this mean that if a person likes his date, he or sue should pay for it with credit (to minimize pain of paying) but if he or she knows the date is a bad match, cash should be used?

  4. Rose Merola says:

    Dear Professor Dan.
    You are a gift to us!!!! Thank you!!! And especially for us seniors!!!! The world of knowledge is not over but just beginning again. Rose M.

  5. Farah Ahmed says:

    So true…Just a thought….During family or friendly dinners at restaurants when it is not clear who is going to foot the bill, people often don’t enjoy the meal in anticipation of the bill amount and worrying about it going out of their pocket. However, if it is made clear right at the beginning as to who would be treating, people would actually savor the food more…

  6. Robert says:

    Dan,

    Great video. I’m looking forward to the Feb 13 class. I have a question; what does the current research reveal about the pain of paying for contingency-fee services? Particularly consulting services. The business world might think “pay for performance” is very attractive but it does have the component of paying after the service is render (like after the cruise is over) and maybe other “pains’ that are not so obvious. Your thoughts?

    Robert

  7. Vibhu says:

    Hi Dan,

    I really enjoyed the 15 min video and look forward to the 13th session. I fully agree that when pain of paying is less,we tend to spend more. Another aspect I have observed is that I typically tend to calculate ratios or percentages. eg. Having spent this much amount already,this is just fraction of the spend to get additional benefits!!
    I guess taking out loans would be extension to this..We get instant gratification but have to repay in small installments.

  8. Keola Nosaka says:

    I laughed when I heard your analysis of AOL moving to its unlimited plan. At that time, I was attending Fuqua’s Executive MBA program and relied heavily on AOL’s internet connection to complete my coursework. My monthly AOL bill was literally hundreds of dollars. Just as bad, there was no such thing as unlimited long distace for telephone, so conference calls with my study group mates were relatively expensive. When AOL switched to the unlimited plan, I was ELATED, lol. Same when the phone companies, years later, switched to unlimited long distance plans. Most major wireless companies, by contrast, have gotten wiser as they’ve eliminated their unlimited data access plans, in favor of plans that make you pay for incremental usage above a base amount of data.

  9. Mimi Nicklin says:

    Brilliantly engaging understanding of shopper behaviour! Thank you for sharing.

  10. Hi DA,
    Always loved your talk – though some of the concepts you had explained – distancing actual cash increases spend – you had covered in your TED talks & in the first book. The way you have summarized the methods to increase pain of paying was very good. I enjoyed the editing – especially the Pizza eating scene. Great informative talk.

  11. Brad Newcomer says:

    Dan – thanks for the interesting insights. I’m curious if you have a point of view as to how the pain of paying applies to subscription models (or loans) where the business attracts customers with low upfront payments, but higher bills in the future. Does this model drive more buyers remorse due to removing the pain of paying to the consumer upfront? Have yoiu studied (or are there any studies) that suggest the right balance of upfront payments versus downstream payments – from both the consumer and business perspective? Obviously the business needs to keep the customer around long enough to make a profit, but needs to attract the customer in the first place with low out of pocket that may lead to a high customer acquisition cost.
    Thanks, Brad

  12. Sergey Khusnetdinov says:

    Interesting concept. I guess some people have different pain thresholds:)
    Now the whole concept of in-game shopping is explained.

  13. Paul Levy says:

    I was in the MHA program in 1975-77. This concept is very relevant to health services utilization. In the “pre-payment is the way to go” days, with payment utterly dissociated from the service (still the case with Medicaid, to a large extent with Medicare) not only was/is there a feeling that I “should get my money’s worth” but there is also no financial pain associated with getting the health care service. Hence, extreme overutilization. We have more recently moved to “consumer directed” plans, causing extreme pain with high deductibles, and we find, which should not be surprising, that people do not obtain inexpensive preventive care, but wind up in the hospital with higher costs to both individuals and society/insurance companies. This year we discussed changing our health insurance plan to a concept in which the preventive and office care was free or cheap, and largely pre-paid (more than the recent federal statutory changes would require), and only put the deductible in for the truly episodic care, for which one can save, if one so chooses, and further the deductible could be “earned down” by participation in various wellness activities. We decided for a variety of reasons to step into this idea slowly over a number of years, but it appears to be a good application of the ideas you have presented and will be presenting in an area where optimizing utilization through a variety of incentives and disincentives has been very difficult. I am looking forward to the presentation tomorrow.

  14. George Smart says:

    Great job, Dan! Despite the lack of sleep, your talk was fascinating and I learned a lot.

  15. David says:

    Healthcare for a patient is both a disassociation of consumption and payment, as well as a pain-of-paying from free versus small amounts of money (copays). How do you believe these concepts complicate healthcare inefficiency and/or how could you leverage these to make healthcare consumption more efficient?

  16. Monal says:

    Professor Dan,

    Amazing! I learned many tips through this video. I enjoyed your live talk and infact the last example of dating crack me up!
    I have a question for you. In an example you mentioned that ,dinner with friends , we can try to take turns. The question I have is what if a person tends to order expensive drinks during the dinner and the rest are just water drinkers. I come across such scenarios at times and I felt like taking turns to pay dinner bill does not quiet work. Any thoughts are appreciated!

  17. Jian J. says:

    Thank you. Great talk as always. Very interesting topics and practical. Where can I learn more about it? Are there any book or research you wrote on this topic?

  18. Jian J. says:

    Hi Dan, can you also share more details on the experiment mentioned during the live session about the 3 schemes of sale incentive for the shift worker. It would be very helpful as I am reviewing the sale incentive scheme for my company. I can also incorporate some of the thing that you would like to experiment further. Thank you.

  19. Yakir Firestane says:

    Hey Dan,
    Great lecture! I learned a lot!
    Could you please post links to the studies mentioned in the lecture (particularly the last one where you described the 41-k game).
    Thanks a lot!

  20. I like this post, enjoyed this one thanks for putting up.

Trackbacks
Check out what others are saying...
  1. [...] the most interesting aspects of the psychology of money: The pain of paying. (See the original post here). Share this:More Pin ItEmailPrint Blog faculty conversation, fuqua, pain of paying, psychology [...]



Leave A Comment