At airports, I’ve noticed an interesting phenomenon illustrating people's lack of rational behavior regarding money.
Some airlines now offer passengers the ability to purchase a bypass of the main TSA security line. For example, the JetBlue Even More Speed option costs $10 or $15 per passenger and allows you to use a special premium passenger security lane.
At some busy airports like Orlando, I figure I’ve you could save on average some 30 minutes by doing this. The main lines are even longer during peak travel times. Yet, the Even More Speed line isn’t popular. Few people take advantage of this opportunity.
This suggests the vast majority of people value their time at less than $20 per hour.
Yet at the very same airports, I’ll witness overbooked flights resulting in airline representatives offering $300 vouchers to passengers willing to give up their seats. All you need to do to qualify for $300 worth of future travel credit is change to the next flight, which typically departs just a few hours later.
I’m always amazed at how few people take up this offer. Sometimes, the airline needs to up the ante because there are no takers. I feel like screaming “Hey people! You can make $150 an hour here!”
It’s amazing that people won’t pay $10 to save a half hour of wait time but those same people won’t take $300 in exchange for waiting an extra two hours.
Exactly how do we value time?
Humans are irrational about money
I suspect the reasons for this disconnect is that on one hand we are reluctant to pay $10 right now for the ability to save a half hour of line waiting. However, we don’t see the value of waiting for two hours to get a $300 reward at some point in the future when we next want to travel.
There is a huge disconnect at work with ramifications for how we go about our personal life. Giving financial decisions just a little rational thought might mean we make a different choice regarding money.
Marketing, sales, and money
Many marketers create products and services and associated advertising to take advantage of our irrationality regarding money. Is getting $1,000 off the price of a new car “saving a thousand dollars”? Of course not! It’s spending $25,000 on a car instead of $26,000.
Companies like Amazon.com and Macy’s and Hotels.com have trained us to never, ever, pay “full price.”
But what is full price anyway? In many industries, it’s an arbitrary number that companies discount from because they know people are irrational about money.