I enjoyed this. I would have liked (or will like? up to you!) an attempt to take this idea and make it into an overarching abstract concept. Something like “Your internal preference curve may rise over the whole range of payoffs, but the chances of some caveat applying increase too, which may make your observed preferences rather different”.
I always think about this with jobs. See a job paying $X/hour, and think it’s fine. Now, if you say that job paying $30*X/hour, you think “What is going on here!??”
In this case, I would prefer more money for the same work, but I suspect that I’m being lied to: that I will have to do more work or otherwise go against my values. In this way, we show that I don’t have a “work-vs-reward” graph in my head, but a “costs-vs-reward” where a high enough reward-per-work makes me suspect I’m incurring additional costs.
I’ll probably end up thinking about this in the background for a while, and jotting down any interesting cases in case they can accumulate into a nice generalizable thing (or maybe I’ll stumble upon someone else who’s made such an analysis before.)
Where I see your example sharing a common idea is that one party makes what appears to be a suboptimal decision (e.g. if they just wanted to attract top talent, a salary at the top of the salary spectrum would suffice), and it leaves the other party to infer what might be the true reasoning behind the decision that would lead to it being an optimal decision (i.e. it assumes the other party is rational.)
Another possible factor is that when people are unable to evaluate quality directly, they use price as a proxy.
You don’t want a crappy realtor who gives you bad information. But you can’t tell which realtors are good and which aren’t, because you don’t know enough about real estate. So, you think, “You get what you pay for” and go with one that charges more, figuring that the higher price corresponds with higher quality.
Here an exchange also happens, except this time it’s your $ for something you have little domain knowledge over. I imagine the peak probability for someone concerned about quality but without a good way to assess it would fall somewhere around a standard deviation above the mean price.
I enjoyed this. I would have liked (or will like? up to you!) an attempt to take this idea and make it into an overarching abstract concept. Something like “Your internal preference curve may rise over the whole range of payoffs, but the chances of some caveat applying increase too, which may make your observed preferences rather different”.
I always think about this with jobs. See a job paying $X/hour, and think it’s fine. Now, if you say that job paying $30*X/hour, you think “What is going on here!??”
In this case, I would prefer more money for the same work, but I suspect that I’m being lied to: that I will have to do more work or otherwise go against my values. In this way, we show that I don’t have a “work-vs-reward” graph in my head, but a “costs-vs-reward” where a high enough reward-per-work makes me suspect I’m incurring additional costs.
I’ll probably end up thinking about this in the background for a while, and jotting down any interesting cases in case they can accumulate into a nice generalizable thing (or maybe I’ll stumble upon someone else who’s made such an analysis before.)
Where I see your example sharing a common idea is that one party makes what appears to be a suboptimal decision (e.g. if they just wanted to attract top talent, a salary at the top of the salary spectrum would suffice), and it leaves the other party to infer what might be the true reasoning behind the decision that would lead to it being an optimal decision (i.e. it assumes the other party is rational.)
Another case I’ve seen recently was in a thread discussing the non-shopper problem.
Here an exchange also happens, except this time it’s your $ for something you have little domain knowledge over. I imagine the peak probability for someone concerned about quality but without a good way to assess it would fall somewhere around a standard deviation above the mean price.