Severing the cycle of comparisonWhenever I interview people over a meal, I have to be careful about what I order. If there are prix-fixed options on the menu, I usually choose the one in the middle. If we order the most expensive option, the interviewee may feel pressured, and if we opt for the least expensive set, I may not be taken seriously. In the end, my choice generally has nothing to do with the food.
A few years ago, the New York Times ran a story about a restaurant consultant who set menu prices knowing that revenue increases when the price of the most expensive option is increased. Not many people order it; most opt for the second most costly. So the consultant focused on making profit there.
Many studies show that decisions are not made based on reason but by comparison. Behavioral economics professor Dan Ariely explains the tendency.
In an ad for subscriptions The Economist ran, the options were: (1) Economist.com subscription for only $59, (2) print subscription for $125 and (3) print and web subscription for $125. The professor showed this advertisement to MIT students, and more people chose option 3 over 1. Naturally, no one chose the second one. People were drawn to No. 3 as it offers more for the same price as No. 2.
However, the outcome changed when he modified the advertisement to (A) online subscription at $59 and (B) print subscription at $125. Twice as many people chose the online subscription than picked the print edition.
In our daily lives, relativity is an important motivator. If you’re looking to buy a 50,000 won ($45) pen and find out that another shop offers a 10,000 won discount, most people would be willing to walk an additional 15 minutes. But, if you’re buying a 700,000 won suit, you wouldn’t waste the time and energy to go to another department store to buy the same suit for 10,000 won less. But the saving would be the same. People who eagerly use a coupon to save 300 won at a supermarket nonchalantly drop 30,000 won on lunch at a restaurant. Buying a 1.2 million won leather couch is a tough decision, but it doesn’t take too much thinking to opt for the leather seat option for the same amount of money when purchasing a car.
When the salary of CEOs became public information in the United States in 1993, executive-level salaries actually went up. Spurred on by what other people were getting paid, CEOs competitively started giving themselves more perks. In Europe and America, there are movements to put a cap on executive compensation because of a sense of relative deprivation. On March 3, Switzerland voted in a national referendum to limit corporate pay.
Making choices based on comparisons is the way we make our way in this complicated world. But the constant comparing is also a huge burden. We get stressed out comparing ourselves to other people at school and at work. Millionaires envy billionaires. Journalist and critic H.L. Mencken said that a wealthy man is one who earns more than his wife’s sister’s husband. Severing the cycle of comparison and living according to your own values is tough, but is the only true way to live life.
*The author is a business news writer of the JoongAng Ilbo.
by Yoon Chang-hee