A tourist’s (irrational) economy

Posted by David Smerdon on Sep 15, 2010 in Economics, Non-chess |

One thing I always marvel at on trips like this is how irrational us tourists can be when it comes to simple economics on vacations.  Really, our main objective on our rare holidays abroad should be to enjoy ourselves and not worry about ‘the little things’, but somehow our human nature just won’t let us.  I’ve notived quite a few demonstrations of flawed economic behaviour on this trip – including my own!

As I’ve mentioned before, behavioural economics tries to explain the psychology behind the irrational behaviours that puzzles conventional economics.  One of my favourite examples is fairness.  Sure, if you do the same transaction many times over with the same people, fairness comes into rational consideration – of course you’ll remember if you get ripped off for the next time you transact.  But on holidays, most transactions are what’s called ‘single-play games’, in that you’re probably never going to see the random Vietnamese street vendors again.

And yet, irrespective of the amounts, we humans naturally get pissed off if we think we’re getting an unfair deal.  Take our hotel for instance.  US $35 a night for a deluxe double room is fantastic value, but we walked past an English couple at breakfast who were in a very spiteful argument with the reception staff about the fact that their Vietnamese friends got the same room for US $31. 

This really shouldn’t have any bearing on their happiness with a sweet room at low cost.  But it’s the relative value of the room, compared with the fact that they’re getting an unfair deal, that pushes them to spend time arguing rather than enjoying their vacation.  This is also an example of how the economics is framed:  while the true value to the couple of staying in the room is a lot higher (perhaps fifty quid a night!), they’ve framed it as being worth the $31, and so it suddenly becomes a bad deal.

This is even more obvious when we bargain here.  Often the amounts we’re bargaining amount to small coinage in Australian terms, but we hate that our taxi ride costs $3 instead of the $2 our fellow tourists paid.  I find this myself when haggling over market goods.  The really irrational thing about this is that the extra dollar to me is nothing, but quite a significant amount to the poor vendor – and yet, after bargaining down the price, I’ll walk off five metres and give some change to some beggars, who I know are likely in basically the same economic situation as the vendor.  Completely irrational.

Of course, another factor influencing this irrational decision is the feeling we get when we think we’ve ‘won’ something, for instance, bargaining down a price.  This is why stores often promote free gifts with purchases over some amount, even though of course these costs are factored into the price.  In this case, I think I’ve ‘won’ the haggling game, though deep down I know that, to the locals, I’m just another Western tourist paying inflated prices.

An example combining both of these traits is the resentment Fi and I felt when AirAsia refused to send our lost luggage to our hotel after they found it two days after our flight arrived.  The taxi fare to the airport and back to pick up our luggage was US $7, far less than the savings you get flying AirAsia (the world’s number one budget airline), but somehow this saving was lost on us.  And, of course, we’d framed it such that we were comparing this to the service of every other airline that delivers lost luggage to your door.

Tourists are silly, and we’re no exception.

Still, I find it all facinating, even if I myself get caught up in it as much as everyone else (perhaps more so).  Really, all these little problems are small change compared to the cost of the air ticket (prices which differ by hundreds of dollars from one day to the next), and the focus should be on enjoying the trip.  I’ve decided to try and remember this and ignore my innate behavioural ticks in all budgeting matters from now on, but we’ll see how that goes.

Besides, I’ve saved a fortune on clothes here.  Right? 

Hmm.

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