You walk into a Starbucks and see two deals for a cup of coffee. The first deal offers 33% extra coffee. The second takes 33% off the regular price. What's the better deal?In the book, Fooling Houdini, Alex Stone talks about how perception is easily fooled. This is from a review:
More than just describing magic tricks, however, Stone also writes about how the human brain/psychology works and can be manipulated. We see how con games are so successful and why people are fascinated by magic. Additionally, Stone's writing style is excellent - the book is perfectly paced and the personal stories are woven in wonderfully with the history and technical descriptions. Highly recommended for just about anybody.
When economists say that consumers are rational, what do they mean?
One way to look at it would be on a cost per ounce basis. Assume a 12 oz cup at reg price of 1.00. If I got 33% more coffee the per oz cost would be $1.00/16oz = $.0625 cents per oz. if I got 12oz for 33% off then it would be $.67/12oz = $.0558 cents per oz. Economic efficiency suggests I take the latter, but my caffeine addicted brain makes me take the former. :)
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