Explain and give an example of a mental transaction cost.
A ‘mental transaction cost’ takes place anytime you go to buy something; a thought gets triggered in your head anytime you think about having to pay for something. As we heard in Anderson’s “Free” chapter he says it’s our, “Is it worth it flag?” that pops up in our head. He also says that when there is a price put on something, even if it’s only one cent, we can’t help but hesitate and think if we really want or need it enough to pay the price for it. One example that comes to my mind when I think of mental transaction cost is when you are going to buy a song on ITunes. I want to get all of these songs on my IPod and seeing a lot of the songs go up from 99 cents to $1.29 makes me hesitate to buy that song more, even though I really want to have it on my IPod. These prices, even though they aren’t necessarily expensive, they have me hesitate to buy them and think more about getting them from a website where they are free, though they are illegal. I never stopped to think about this whole concept but when I look back on it I completely see how every single time, without, a doubt I see something I want I always think about if I really want it and if the price is worth it.
Another tipping point, if you will, was that jump from .99 to 1.29. If it was under a dollar, it was easier to spend.
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