Season of Sensibility
Written by Alejandro Neufeld
Christmas was upon us, and even though the Lethbridge area was free of snow, one visit to Park Place Mall or the city centre reminded us that Santa was almost ready to visit our city. The anticipation of family reunions, movie marathons, and a hearty meal excited us, getting us right into the Christmas spirit. The joy was palpable and infectious to the point that we often forgot about budgets and bills while shopping for gifts for family, friends, or that special someone in our lives.
When January rolled around, and we checked our bank accounts, we were often shocked at how much we had spent for the holidays. This was a terrible way to start a new year, but it did not have to be an annual issue.
Human Cognition & Financial Decision-Making
For me, university is most enjoyable and rewarding when students can make connections between material learned in classes and their real lives. Last semester, I took a course titled “Psych 3050: Human Cognition.” The course, taught by Dr. Javid Sadr, focused on the behaviours and underlying mental processes of people, which we call cognition. The textbook we studied, “Cognition” (2021), written by psychologists Marvin Chun and Steven Most, provided advantageous strategies for consumers to help them make better financial decisions. In their exploration of judgment and decision-making, Chun and Most described strategies that advertisers and companies used to encourage consumers to spend more money. However, knowing these strategies also empowered us to save money. Just because it was the holiday season did not mean we had to splurge on gifts, decorations, and other Christmas expenses. Celebrating was much easier without credit card statements gnawing at us.
In Chapter 9 of “Cognition” (2021), Chun and Most discussed anchoring and the decoy effect as they related to judgment and decision-making. Anchoring was defined in the textbook as “The concept that different starting points (initial values) produce different estimates or decisions” (Chun, Most, 234). While this sounded straightforward, it became more subversive when used by retailers and businesses. Chun and Most referenced a study by psychologist Ariely in 2008, where subjects were given three different subscription options for a magazine. One option was a digital subscription costing $59; another was a print-only subscription for $125; and the final option was a combined digital and print subscription, also priced at $125. Unsurprisingly, 84% of subjects chose the combined option, while the remaining 16% chose the digital-only option. The purpose of the print-only option was to steer subjects towards the combined option, as evidenced by their identical pricing. This study illustrated how understanding anchoring could be beneficial during Christmas shopping.
For example, imagine looking for a winter jacket for your cousin at SportChek or Mark’s. You found a jacket and noticed another, slightly more expensive one next to it, with a promotion for discounted snow pants. However, the more expensive jacket had less lining and felt cheaper than the one without the discount. Realizing that your cousin did not need snow pants, you opted for the cheaper jacket, saving $25. This decision-making process was a perfect example of using anchoring to your advantage.
The Decoy Effect
Another psychological tactic to be aware of was the decoy effect. Chun and Most defined it as “the introduction of a more- or less expensive item that provides an anchor to stimulate the sales of the target item” (Chun, Most, 235). They described a case involving Williams Sonoma, where the introduction of a higher-priced bread-making machine increased the sales of a $275 option. The decoy effect was a staple of holiday advertising, and the cause of many defunct bank accounts coming January 1st. But just like anchoring, we can use our knowledge of the decoy effect to recognize it and adapt accordingly.
Imagine you are holiday shopping, this time seeking a gift for your niece. She is an avid gamer and a fan of Super Mario, prompting you to visit Best Buy’s website in search of new controllers for her Nintendo Switch. There, two options catch your eye: the first includes two Joy-Con controllers priced at $99.99, while the second, a Super Mario Party Bundle, also contains two Joy-Con controllers but is priced at $129.99 (At the time of writing this article, these were actual options on Best Buy’s website).
Here, the decision becomes less clear. Is the less expensive option merely a decoy, designed to make the pricier one, which includes the Super Mario Party game, seem more appealing? Conversely, could the more expensive bundle be the decoy, intended to steer you towards just purchasing the controllers for $30 less? In such situations, a psychological tactic known as tallying can be useful. This involves weighing the pros and cons of each option to determine which offers more benefits. Considering your niece’s love for her Nintendo Switch and Super Mario, the $30 difference seems to favour the more expensive option, as it includes both the controllers and the Super Mario Party game. Thus, you choose the pricier option, a decision made easier by the money you saved buying a jacket for your cousin. Although the cheaper controllers appeared to be more popular online, this factor is irrelevant in your decision, as the benefits of the game-controller bundle promise greater happiness for your niece.
The decoy effect, while somewhat subjective, becomes clearer upon critical examination. Studying judgment and decision-making just before the holiday season has proven insightful, a period notorious for hasty and often regrettable spending. As someone prone to spontaneous decisions, I have realized that my financial choices in December often lead to consequences in January. It is disheartening to see that many companies are focused on taking advantage of consumers during a season meant for giving. Human behaviour and decision-making are often exploited to manipulate consumers. So, when you shop for gifts during the holidays again, remain sensible and composed. Do not let the holiday rush deplete your finances. Instead of a season marred by financial woes, I advocate for a season of sensibility and empathy. If extravagant gifts are beyond your budget, consider offering your time, energy, and love to those who need it most.
I extend my gratitude to Dr. Sadr for thoroughly discussing Chun and Most’s textbook and making complex concepts more accessible and applicable. I hope the strategies I have shared prove useful not only for holiday shopping but also for any stressful financial or personal decisions.
Chun, Marvin M, and Steven B Most. Cognition. New York Sinauer Associates, Oxford University Press, 2021.
“Nintendo Switch Gaming Accessories: Controllers, Docks, & Starter Kits | Best Buy Canada.” Www.bestbuy.ca, www.bestbuy.ca/en-ca/category/nintendo-switch-accessories/3458023?icmp=mdot_vg_acc_nintendo. Accessed 21 Dec. 2023.