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Go Get Your Free Slurpee Today…Or Don’t, If You’re Smart?

July 11th, 2010 · 15 Comments
Behavioral Econ · Decision Making · Follow Ups · From The Vault

Reader Sean Writes:

In the spirit of 711 day where all the loyal patrons are lavished with a free slurpee, I recall past events at other stores that utilized the same gimmick. Particularly, I remember a smoothie shop that had recently opened a month or so before offering a free smoothie promotional for the entire day. For whatever reason, I attended this event along with 150 or so others.

Given the time it takes to make a personalized smoothie, being the 150th person in line basically guarantees at least an hour wait. And waited they did. This is despite that A) a smoothie cost like only 4 bucks and B) it happened to be in one of the most affluent zipcodes of Arizona.

Have you ever ran into this topic in your research. Why when something is ‘free’ are people willing to incur intangible costs that far exceed the $4 they are (mostly) unwilling to pay on any other day. I realize there might be benefits in the form of a sort festive gathering, but still. I recall Chipotle did the same thing- with the same results, same absurd wait.

Question: Why did I wait in line when I don’t even really like smoothies?

So I did actually write about this sort of thing a while back after witnessing a perplexing situation at the Harvard Square Ben & Jerry’s. From May 2009:

In pondering an earlier potential post I ended up doing a bit of research on Ben and Jerry’s. I had learned that April 21st was free cone day, and I was going to impart this oh-so-important knowledge on my lovely readers…but then I got disinterested in the post and it never got published. (It happens a lot, in case you are curious. I currently have about 30 or so drafts happening. Call it Economic Attention Deficit Disorder.) I apologize profusely for denying you your free cones, since as an economist I really like to err in favor of thinking that more information is better, but part of me feels like I may have done you a favor. Behold:

That is a damn long line for a free $4 item. (It was actually longer than it looks in the photos.) Let me remind you of Economic Principle #2, courtesy of Greg Mankiw: “The Cost of Something is What You Give Up to Get It.” In economic terminology, this concept is called opportunity cost. I bring up these ideas to make the point that the ice cream cone is not actually free unless your time has no value (and you like waiting in line as much as you like other activities). Let’s think about a few (contrived) scenarios:

  • Suppose you have a job that pays you $10 per hour. To go to Ben and Jerry’s and wait in the line for your “free” ice cream cone takes one hour. Therefore, you gave up the $10 you could have made by working, and the opportunity cost of the ice cream cone is $10.
  • Suppose you don’t have a job and spend your days sitting on the couch and watching TV. In this case, you aren’t giving up money to wait in line for your ice cream, but you are giving up an hour of pleasurable couch sitting and TV watching. I would have to imagine that sitting on the couch and watching The Daily Show, or 30 Rock, or Psych…or whatever floats your boat is more pleasant than waiting in line, so you are still incurring some sort of cost to get your ice cream.

This is not to say that the ice cream is not worth it- rather, I am just trying to make sure that you know how to think about the choice in the most sensible way possible. But wait- psychologically, there is even something else to think about in the decision-making process. I will call this Economic Principle #372: People Like To Feel Like They Got A Good Deal. Richard Thaler would call it transaction utility. In other words, it could very well be the case that the usefulness of the ice cream itself is not enough to make it worth it to wait in the line, but the happiness you get from knowing you got something for “free” could push you over the edge. Food for thought, literally.

In theory, you could extend the concept of transaction utility to account for the fact that some people really like getting things in the mail, since it separates payment from consumption and makes you feel like it’s your birthday whenever something shows up. I am one of those people, and thus I can relate to the following xkcd cartoon:

I also did a follow up back in March, mainly to alert people to the fact that it was not only free cone day but also (sort of) free pastry day, even though I think waiting in line for an hour for these “free” things is usually pretty idiotic. (See how non-paternalistic I am?) I find Sean’s note to be particularly interesting due to the fact that he makes it clear that he is aware of the concepts of the value of time, opportunity cost, etc., so I have to rule out ignorance as a potential explanation. Therefore, I am compiling a new list of reasons why we might observe this behavior from people like him:

  1. Large enough transaction utility – i.e. Sean gets enough satisfaction from getting stuff for free that it outweighs the time and effort expended.
  2. Sean’s value of time is very low – perhaps he is unemployed or injured in such a way that sitting on the couch is not enjoyable.
  3. Sean is really fascinated by lines – if this is the case, I suggest a career in queueing theory and operations research. (Personally, I am in fact a little fascinated by lines.)
  4. Sean is using the free smoothie as an excuse to procrastinate. (For the record, I prefer to me the pot, and Sean can be the kettle.)
  5. Sean wanted an excuse to write to me with a reader question. 🙂

Can you think of other potential explanations?

Tags: Behavioral Econ · Decision Making · Follow Ups · From The Vault

15 responses so far ↓

  • 1 Brad // Jul 11, 2010 at 5:30 pm

    Waiting in line may not be totally wasted time. You could phone someone, use a computer if there’s free WiFi, think, plan, daydream, or meditate.

  • 2 Emily // Jul 12, 2010 at 1:10 am

    There’s a lot in Dan Ariely’s Predictably Irrational about human behaviour when things are given away for ‘free!’

  • 3 Meds // Jul 12, 2010 at 7:44 am

    Haha…I recall seeing the same thing at Baskin Robbins a couple years ago—1 hour line out the door for a free scoop. So I drove a quarter mile down the road and bought a $3.00 sundae from Carvel. Ariely did this phenomenon justice in PI. We tend to go mental for the word “free.”

  • 4 Maxine Udall // Jul 12, 2010 at 9:26 am

    People combine own-time and goods purchased in the market to produce leisure/fun (and other commodities that presumably yield benefit to them). (At least according to Gary Becker and a lot of empirical evidence suggests this isn’t a bad model to start with.) All else equal, individuals with higher wage rates will tend to substitute away from own-time intensive goods and commodities to money intensive goods and commodities. The substitution effect will be even greater if they work more than, say, 40 hours/week and are therefore approaching the limit of their daily time constraint. I think it gets tricky if your line (in Harvard Square) contains a disproportionate number of students. The opportunity cost of their time is foregone studying, class time, or other leisure-related activities. We could value their time by imputing a wage rate commensurate with their education, skills, and abilities under the theory that there is some wage rate that would induce them to drop out and join the labor market. Somehow, that seems nonsensical because presumably that wage rate would have to offer the same present value of expected lifetime earnings as the present value of their expected lifetime Harvard-educated earnings. Even allowing for a few extra years of labor force participation, induced by early drop out, it seems unlikely that there are many of such jobs and wage rates floating around. So let’s assume that the value of a Harvard student’s time reflects those lifetime expectations, i.e., is pretty high.

    At the same time, individuals with more time than money will tend to substitute away from money intensive good and toward time intensive goods, all else equal. During my own days as an undergrad and graduate student, I had very little time available, but also very little money. It’s not clear what I would have done on free cone day. My point it that there must be a lot of unobserved heterogeneity in the demand for leisure in the form of standing in line for free cones.

    I guess my point is that it would be hard to conclude that people standing in a line for free ice cream are irrational without knowing something about their time and budget constraints and their preferences for leisure. Surely there is selection bias. The fact that they are standing in line suggests either strong preferences for this type of leisure or relatively more available time than money. I agree that “free” probably contains some mystical allure for some human psyches, but standing in line for a free $3 ice cream cone may not be as irrational as you seem to suggest.

    Very nice blog!

  • 5 Sean // Jul 12, 2010 at 10:56 am

    #5

  • 6 Dan L // Jul 12, 2010 at 11:56 am

    I responded the last time you wrote about this, and I will respond again.

    (1) For people who wait in line together, the cost is close to nil. For example, human beings often sit around in ice cream stores and restaurants even after they are done eating. DON’T THEY UNDERSTAND THE OPPORTUNITY COSTS OF THEIR ACTIONS? (Granted, standing in line is less enjoyable than sitting at a table.)

    (2) As Brad points out, in the modern age, even waiting in line alone is not so awful. In my case, subway rides and lines are my designated times for reading the newspaper.

    (3) Stop maligning Ben & Jerry. I don’t think I’ve ever waited more than 10 minutes for a free cone. Meanwhile, I’ve seen many instances when people wait over 10 minutes for Coldstone when it’s not even free.

    I like to get free things (the transaction utility), but I do take into account the probable line situation–analyzing how likely something can be served both free and fast. For example, if a Ben & Jerry’s is fully staffed and prepared to give away ice cream and doesn’t have to spend time dealing with money, they can serve ice cream *very* fast.

    Tangential point: Your pictures don’t say much, since the physical length of a line doesn’t tell you what the temporal length is.

  • 7 Dave // Jul 12, 2010 at 1:58 pm

    I cautioned students about this same thing when Chipotle opened up hear us a few years ago. Several of them went anyway and even though the line was out the door, they got through it in 10 minutes. They had enough people on the line for maximum efficiency, and the fact that they didn’t have to ring up orders saved a lot of time.

    FYI: they did this promotion on the same day that a Qdoba opened up two blocks away.

  • 8 Dan L // Jul 13, 2010 at 10:46 am

    Thanks to Chipotle’s furious expansion, last year I had 3 free Chipotle burritos (at a value of about $8 each). I admit that it’s only manageable because of the large number of people who fear the long line.

  • 9 David Andersen // Jul 13, 2010 at 11:00 pm

    “Suppose you have a job that pays you $10 per hour. To go to Ben and Jerry’s and wait in the line for your “free” ice cream cone takes one hour. Therefore, you gave up the $10 you could have made by working, and the opportunity cost of the ice cream cone is $10. ”

    Isn’t that 6$? I give up $10 but get a $4 cone in return?

  • 10 Amarsir // Jul 16, 2010 at 3:44 am

    @David Andersen:
    If you paid cash for the cone what would the cost be?
    If you paid time for the cone, what would the cost be?

    You could say the cone costs an *additional* $6, but as stated above the cost of something is what you give up to get it. So by giving up the whole hour, your opportunity cost is $10.

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  • 15 Mark // Oct 31, 2012 at 2:19 pm

    … or the nearest 7/11 is 8 miles away … and you drive a vehicle that gets 16 miles per gallon. I know plenty of people that would make the drive for the free smoothie despite the cost of gasoline being about equal to the “free” product. And I’m assuming that their time is worthless, or that the entertainment value of driving there, waiting on line, and then telling everyone about it the next day at work makes it worth their time.

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