Question

One type of systematic error arises because people tend to think of benefits in percentage terms rather than in absolute dollar amounts. As an example, Samir is willing to drive 20 minutes out of his way to save $4.00 on a grocery item that costs $10.00 in a local store. But he is unwilling to drive 20 minutes out of his way to save $10.00 on a laptop that costs $400.00 at a local store. In percentages how big is his savings on the grocery item? On the laptop? In absolute terms, how big is the savings on the grocery item? On the laptop? If Samir is willing to sacrifice 20 minutes of his time to save $4.00 in one case, shouldn't he be willing to sacrifice 20 minutes of his time to save $10.00?

Answer 1

he is saving 40% on the $10 item
but only 2.5% on the $400 item