Tag Archives: Money

Cases

Memory over matter: Why Cafe Strada at UC Berkeley means the world to me

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Cafe Strada has long been a beloved spot among UC Berkeley students. Its prime location inside the campus, cozy patio, and inviting workspaces make it the perfect place for studying alone or meeting friends.

But for me, Cafe Strada is more than just a popular cafe. It is a personal place tied to a memorable period of my life. In 1999, as an exchange student living at the International House, I often stopped by this cafe in the morning. A five-minute walk there was a comforting ritual.

When I revisited 25 years (!) later, I was amazed that nothing had changed. The International House and Cafe Strada remained just as I remembered it. While everything around me seems to change, their steady presence felt like a journey back in time.

Then, I ended up buying more baked goods than I needed, but it did not matter. When I did this nostalgic consumption, as psychologists argue, my desire to save money was weakened. For me, Cafe Strada is more than just a cafe—it is where memory dominates money.

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Reference

Lasaleta, J. D., Sedikides, C., & Vohs, K. D. (2014). Nostalgia Weakens the Desire for Money. Journal of Consumer Research, 41(3), 713–729.

Nostalgia has a strong presence in the marketing of goods and services. The current research asked whether its effectiveness is driven by its weakening of the desire for money. Six experiments demonstrated that feeling nostalgic decreased people’s desire for money. Using multiple operationalizations of desire for money, nostalgia (vs. neutral) condition participants were willing to pay more for products (experiment 1), parted with more money but not more time (experiment 2), valued money less (experiments 3 and 4), were willing to put less effort into obtaining money (experiment 5), and drew smaller coins (experiment 6). Process evidence indicated that nostalgia’s weakening of the desire for money was due to its capacity to foster social connectedness (experiments 5 and 6). Implications for price sensitivity, willingness to pay, consumer spending, and donation behavior are discussed. Nostalgia may be so commonly used in marketing because it encourages consumers to part with their money.

Cases

Psychology behind dynamic toll pricing in California

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A recent drive on an express lane showed tolls as high as $9 to Broadway and $10 to I-380, depending on real-time conditions. What makes this interesting is that the price for using the same road is not predetermined; it is decided on the spot.

Dynamic toll pricing may adjust based on traffic volume, creating an anchor for drivers to evaluate the value of the express lane. If traffic is heavy, the higher toll can feel worth it when compared to the frustration of sitting in congestion. This shifting price serves as a real-time incentive or deterrent, depending on how drivers value their time at that moment.

Mental accounting, the tendency to categorize resources such as money and time, is a key principle at work. The price is not just about the toll but about the potential loss of time stuck in traffic. For many, the higher toll feels like a small price to pay to avoid the larger loss of wasted time, especially during busy hours.

Dynamic pricing taps into our varying perceptions of time. During a stressful commute, paying $10 to save several minutes is more appealing than when traffic is light. The system uses behavioral cues to nudge drivers into seeing the express lane as a valuable, time-saving option.

In essence, dynamic toll pricing leverages human psychology to adjust behavior in real time, making the express lane more than just a road—it is a reflection of what happens when we convert time into money.

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Reference

Soman, D. (2001). The mental accounting of sunk time costs: Why time is not like money. Journal of behavioral decision making, 14(3), 169-185.

The sunk-cost effect, an irrational attention to non-recoverable past costs while making current decisions, has been documented widely in the domain of monetary costs. In this paper, I study the effect of past time investments on current decisions. In three experiments using choice situations, I demonstrate that the sunk-cost effect is not observed for past investments of time, but the effect reappears when the investments are expressed as monetary quantities. I further propose that this ‘pseudo-rationality’ is due to the fact that individuals lack the ability to account for time in the same way as they account for money. In two additional experiments, I facilitate the accounting of time and show that the irrational sunk-cost effect reappears. In a final experiment, I test my propositions in a setting where subjects make real investments of time and subsequently make real choices.