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army1987 comments on Rationality Quotes February 2013 - Less Wrong
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Yep. Most people seem to behave as though the choice between spending $5 and spending $10 is a much bigger deal than the choice between spending $120 and spending $125, but if anything it's the other way round, because in the latter case you'll be left with less money. (That heuristic does have a point for acausal reasons analogous to these insofar as you'll have to make the first kind of choice much more often than the second, but people will still behave the same way in one-off situations.)
Another possible motivation for that heuristic: something that's a good buy for $5 might well be a bad buy for $10, but something that's a good buy for $120 is probably still a good buy for $125. If I find that a cheap item's twice the cost I thought it was, that's more likely to force me to re-do a utilitarian calculation than if I find an expensive item is 4% pricier than I thought it was.
Yes, but OTOH if I'm about to buy something for $125 it isn't that unlikely that if I looked more carefully I could found someone else selling the same thing for $120, whereas if I'm about to buy something for $10 it's somewhat unlikely that anyone else would sell the same thing for $5 (so looking around would most likely be a waste of time), and I'd guess these two effects would more-or-less cancel out.
I can often get a $10 good/service for $5 or less if I'm willing to delay consumption or find another seller (e.g. buying used books, not seeing films as soon as they come out, getting food at a canteen or fast food place instead of a pub or restaurant, using buses instead of trains). I might be atypical.