Thursday, January 31, 2008

Bonus Points

We are all just nuts. Psychology is interesting until you realize how silly our thinking processes are sometimes.

The most important thing politicians can do to make the upcoming tax stimulus work, say some behavioral economists, is to change the name. Thought you were giving out rebates? Nope. You're giving out bonuses. Controlled studies where half the group is given a rebate of value X and half the group is given a bonus of the same value find that those with the bonus spend more than twice what those with the rebate do. "Psychologically speaking, they conclude, "[a rebate is the return of a loss of one’s own money rather than a pure gain provided by someone else, so it is unlikely to be seen as extra spending money. Getting a rebate is more like being reimbursed for travel expenses than like getting a year-end bonus. Reimbursements send people on trips to the bank. Bonuses send people on trips to the Bahamas."

Is it any wonder advertising and branding work so well? We’re all idiots.

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