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Zero Bias
It seems another bug in the human brain is being uncovered:
"Whereas a 20 percent interest rate may look very large compared to one percent, it may not look as large compared to zero percent. Zero eliminates the reference point we use to assess the size of things,"
http://www.scienceagogo.com/news/20101015200630data_trunc_sys.shtml
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Comments (5)
In the credit card example, 0% interest prompts me to ask "What's the catch?"
At work we have highly variant results, and it has a huge effect on my decisions knowing that it's far more important in terms of how I am perceived (and how I feel, even though I know better) to go from -100 to +100 than to go from +100 to +1000.
Interesting, thanks.
Interestingly 0 as in "free stuff" is also often mispriced (hence all the 'free offers' you get in the mail).
Yup, Dan Ariely often talks about this in his books.