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Benny
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(#1) Is this rational?
« on: Nov 26th, 2009, 5:12pm » |
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Is the following rational ...
(1) ... to mow your own lawn in order to save $X, but to refuse to cut the lawn next door for the same amount of money?
X = $20
(2) ... to shovel snow off your house to save $Y (roof, driveway, sidewalk in front of your house), but refuse to do it for your neighbors for the same amount of money?
Y could be $100
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| « Last Edit: Nov 28th, 2009, 12:30pm by Benny » |
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0.999...
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Re: Is this rational?
« Reply #1 on: Nov 27th, 2009, 4:13am » |
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No way am I mowing my neighbor's massive lawn compared to mine!
Analogous circumstances apply for the shoveling.
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Obob
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Re: Is this rational?
« Reply #2 on: Nov 27th, 2009, 10:19am » |
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Is it rational to work a 40 hour week, when you are offered to work 80 hours a week with time and a half pay for the second 40 hours?
Of course it is, money isn't everything in this world.
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Benny
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Re: Is this rational?
« Reply #3 on: Nov 28th, 2009, 12:34pm » |
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on Nov 27th, 2009, 4:13am, 0.999... wrote:No way am I mowing my neighbor's massive lawn compared to mine!
Analogous circumstances apply for the shoveling. |
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Since your neighbor's lawn is larger, then the $20 is not a strong incentive.
So, what is a fair market price? how much should you charge to mow a lawn?
You might want to contact a few local lawn care businesses in your area and get an estimate from them to service your lawn .... You will know the price, plus you can find the square footage size of your lawn and you can divide that out to figure how much to charge per square ft. This should give
you a ballpark figure.
Once you know the cost for mowing the lawn, you can charge less your neighbor's lawn and you could go and talk to your neighbor and negotiate for a price with him or her. Find out what your neighbor would consider a fair price
Suppose a lawn care business would charge an amount between $40 and $50?
Would you do it for an amount between $30 and $35 and if your neighbor agrees?
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Benny
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Re: Is this rational?
« Reply #4 on: Nov 28th, 2009, 12:40pm » |
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on Nov 27th, 2009, 10:19am, Obob wrote:| Is it rational to work a 40 hour week, when you are offered to work 80 hours a week with time and a half pay for the second 40 hours? |
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Your example doesn't really match the problem I posted.
In the problem I posted we are faced with two options: doing a chore in order to save some money, and refusing to do the same service for a neighbor because we value the extra time.
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Of course it is, money isn't everything in this world. |
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Sure, it is our relationship with money, how we think about money that I'm exploring here.
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| « Last Edit: Nov 28th, 2009, 12:42pm by Benny » |
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Obob
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Re: Is this rational?
« Reply #5 on: Nov 28th, 2009, 12:52pm » |
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on Nov 28th, 2009, 12:40pm, BenVitale wrote:
In the problem I posted we are faced with two options: doing a chore in order to save some money, and refusing to do the same service for a neighbor because we value the extra time.
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It really isn't so different, though. In both cases, you are presented the opportunity to save or make extra money. Adding the neighbor into things doesn't really change much.
You can have many reasons for wanting to mow your own lawn aside from the monetary aspect. In fact, most professionals could make more money working at their own job than they save by mowing their own lawn. But they might like the exercise, being outdoors, or improving their own lawn. At the same time, they might like the first two, but the amount of time it takes to mow one lawn is as much as they want.
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Benny
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Re: (#1) Is this rational?
« Reply #6 on: Nov 29th, 2009, 1:14pm » |
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Well, the common thread between the two problems -- mine and yours -- is Opportunity cost
Before I go and attempt to explain further, let me introduce an experiment that will shed some lights on the problem I posted.
Experiment :
(A) If someone offers you a choice of a sure $50 or, on the flip of a coin, the possibility of winning $100 or winning nothing.
(B) And, conversely, a choice of a sure loss of $50 or, on the flip of a coin, a loss of $100 or losing nothing
What do you do in option (A)? How about in (B)?
Explain your answers.
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Benny
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Re: (#1) Is this rational?
« Reply #7 on: Dec 2nd, 2009, 2:47pm » |
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With option (A):
Most people will take the sure $50.
'A sure thing is better than a maybe', they reason.
But in option (B):
Most people will go for the coin toss to save themselves from loss even though the coin flip could mean an even greater loss.
There's no reciprocity between a negative dollar and a positive dollar. Each dollar is viewed differently. People tend to view the possibility of recouping a loss as more important than the possibility of greater gain.
Suppose XYZ is a company listed on the stock market. If XYZ shareholders watch their stocks drop drammatically ... no matter how low the price drops, investors, believing that the price will eventually come back, often hold onto stocks.
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Grimbal
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Re: (#1) Is this rational?
« Reply #8 on: Dec 2nd, 2009, 10:45pm » |
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And the paradox is that A and B are the same except that in A you are given $50, and in B $50 is taken from you. In both cases you are then offered to gamble $50 on a "double or loose" bet.
I read somewhere that people are more likely to gamble with money they just received as a present than if they have to come up with the money. The feeling of owning the money is less in the first case. So they are less protective about it.
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| « Last Edit: Dec 2nd, 2009, 10:49pm by Grimbal » |
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JiNbOtAk
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Re: (#1) Is this rational?
« Reply #9 on: Dec 22nd, 2009, 3:16am » |
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Quote:A young boy went up to his father and asked him, “Dad, what is the difference between potentially and realistically?”
The father thought for a moment, then answered, “Go ask your mother if she would sleep with Brad Pitt for a million dollars. Then ask your sister if she would sleep with Brad Pitt for a million dollars, and then, ask your brother if he’d sleep with Brad Pitt for a million dollars.
Come back and tell me what you learn from that. So the boy went to his mother and asked, “Would you sleep with Brad Pitt for a million dollars?” The mother replied, “Of course I would! We could really use that money to fix up the house and send you kids to a great university!”
The boy then went to his sister and asked, “Would you sleep with Brad Pitt for a million dollars?” The girl replied, “Oh my God! I love Brad Pitt. I would sleep with him in a heartbeat, are you nuts?”
The boy then went to his brother and asked, “Would you sleep with Brad Pitt for a million dollars?” “Of course,” the brother replied. “Do you know how much a million bucks would buy?”
The boy pondered the answers for a few days and then went back to his dad. His father asked him, “Did you find out the difference between potentially and realistically?”
The boy replied, “Yes. Potentially, you and I are sitting on three million dollars, but realistically, we’re living with two hookers and a gay.” |
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Potentially, I could be making million of dollars mowing everyone'w lawn, but realistically, I'm just another lazy bum.
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Benny
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Re: (#1) Is this rational?
« Reply #10 on: Jan 7th, 2010, 12:27pm » |
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on Dec 2nd, 2009, 10:45pm, Grimbal wrote:| And the paradox is that A and B are the same except that in A you are given $50, and in B $50 is taken from you. In both cases you are then offered to gamble $50 on a "double or loose" bet. |
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I read somewhere that people are more likely to gamble with money they just received as a present than if they have to come up with the money. The feeling of owning the money is less in the first case. So they are less protective about it. |
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Psychologically speaking, people push aside the probabilities, and simply compare the loss (Free money that wasn't theirs in the first place) with the gain (the payout).
That comparison corresponds to assigning equal probabilities, half and half, to the two possibilities, treating not-happening and happening as equally likely. With those probabilities -- what the heck! It makes sense for them to gamble.
We see that type of reasoning with people who buy lottery tickets:
They think of a number, they buy a ticket. If they lose, it's a small loss.
But if they don't buy a ticket and that number wins. They feel frustrated. They wish they had bought a ticket.
It is not rational to treat things with different probabilities as if they were equally likely.
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Benny
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Re: (#1) Is this rational?
« Reply #11 on: Jan 7th, 2010, 1:11pm » |
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on Dec 2nd, 2009, 10:45pm, Grimbal wrote:| And the paradox is that A and B are the same except that in A you are given $50, and in B $50 is taken from you. In both cases you are then offered to gamble $50 on a "double or loose" bet. |
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Yeah, as I mentioned above, the chance of recouping a loss is such a psychological powerful motivation to go ahead.
Notice that ...
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(B) And, conversely, a choice of a sure loss of $50 or, on the flip of a coin, a loss of $100 or losing nothing |
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... the sure loss of $50 represents a certainty, and that knowledge in advance is “peace of mind”, worth the loss, even though it's an arithmetically bad deal.
Why do they do it?
Maybe that risk represents a sort of dream-aid ... and maybe that is enough/worth for taking a risk.
And the fun too. If people have fun, then it's worth the risk, too.
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