Thursday, July 17, 2008

"Splitting the check increases the pain"

For my first post for the month of July, I've decided to write a little about an interesting segment I heard on NPR the other day. Here is the transcript.

Dan Ariely, a behavioral scientist at MIT, has conducted a study about the pain of paying. He has concluded that in the long term it is less painful for one person to pay for the entire bill rather than everyone splitting, also known as "going Dutch." He reasons that the degree of pain does not increase proportionally to the increase in the price of the meal. For instance, quantitatively speaking, the pain I feel in paying for my $10 meal does not double if I pay $20 for both of us.

But there are some obvious assumptions here which Dan Ariely points out - that there needs to be same participants for regularly scheduled meals, eating at the same restaurant, ordering the same priced meal. These assumptions however don't appear to be unattainable. My buddies and I could form sort of "guys night out" group and pick one place we all really like, schedule regular get-togethers, and we could all take turns paying for the entire group.

But there's an additional assumption that Ariely leaves out, inadvertently or not. That is, the beginning degree of pain will likely differ for each member of the group. For instance, if I'm a student in debt up to my eyeballs, well, it will be more painful for me to pay than my friend who makes six figures, regardless of what type of restaurant we go to. However, like the other assumptions discussed above, it doesn't seem impossible to adjust for this differential. When it is my turn to pay, we could go to a fast food joint, but when it is my friend's turn to pay, we could go to an a la carte steakhouse.

However, delving deeper into the analysis, perhaps in the long run, such adjustment won't even be necessary. It seems to me that, as we enter the labor force, our social network, for better or worse, naturally becomes homogenized, particularly for income and status. For example, as a member of the legal profession, my closest friends, who make up my social network, are either attorneys or other white collar professionals in business and medicine. Therefore, if I create a group from my social network, then our incomes will probably be at least somewhat similar, so our initial degree of pain will also be similar.

Anyway, I thought this was an interesting read.

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