The Hidden Cost of “Free”
I’m a sucker for free stuff, as much as I hate to admit it. Being on a college campus, I tend to go back to my dorm with a lot of free stuff I don’t really need or even like. Over the year I’ve accumulated t-shirts, water bottles, posters, and various other items.
It’s not just at school either. For example, tomorrow is free smoothie day at a local smoothie store. I’ve been quite excited looking forward to this for a couple days, until I really stopped to think about it and weigh the costs and benefits of going. Even though the store isn’t that far (about a 15 minute bus ride, which, when you don’t have a car is not considered to be that bad), I’m probably losing out on more to get the free item. Not only is the bus fare $1 each direction, but I’m losing 30 minutes of my time, which is a precious resource I can never get back. The popular phrase “there’s no such thing as a free lunch” applies, and in the end, the free smoothie doesn’t really seem so free anymore.
I admit that is a simple example, probably quite obvious with some common sense. (What can I say in my defense? I love smoothies!) But think about it on a larger scale: people react to free items in quite strange ways. Dan Ariely, a professor at MIT and the author of Predictably Irrational, was curious about this phenomenon and designed an experiment to observe the average person’s behavior in such situations. For his experiment, he set up a table in an MIT cafeteria. The cafeteria normally offered high-priced Lindt chocolate truffles for 15 cents and ordinary Hershey kisses for a penny. 73% of the customers saw a good deal and went for the truffles. Next, he lowered the prices of both chocolates by one penny. The 15 cent Lindt truffles became 14 cents, and the Hersey kisses became free. This time, 69% of the customers went for the kisses, even though the difference in price between the truffles and kisses remained the same. What happened to all the people who liked the truffles? They instead flocked to the FREE! item.
So why is the allure of a free item so special? Ariely believes that “most transactions have an upside and a downside, but when something is free we forget the downside. Humans are afraid of loss, and when there’s no visible possibility of loss [such as with the free item], we will choose it.” Of course, some free items are great and will benefit us, but it’s always important to think about the cost hidden in a “free” item.