Posted by Jay Livingston
Let a group of kids trade their candy bars – the “I’ll swap you three Krackles for a two Milky Ways” sort of thing – and you’ll wind up with an allocation that, on the whole, has greater value.
That’s the gist of a Marginal Revolution post by Alex Tabarrok. Now we know what Alex did with his leftover Halloween candy. . . only the “kids” were college students in his economics class, and the trading was not post-Halloween fun; it was a classroom exercise to demonstrate “gains from trade.”
Students open the bag and are then asked to write down how much they would be willing to pay for the bag's contents. But before snacking, students are allowed to trade. After a few minutes of trade, ask the students to write down their valuation again. Voila! Gains from trade. With a few numbers pulled at random from the students you can do a back of the envelope calculation for the total increase in value.No doubt the economic explanation is valid, but when I read the post, the idea that sprang to mind was something that didn’t occur to Tabarrok or any of the people who commented on the post: cognitive dissonance, more specifically “postdecision dissonance.” People will value something more if they’ve chosen it rather than having no choice.
It’s the converse of “sour grapes” (if I can’t choose it, it wasn’t sweet). Ask people what each of two candy bars is worth or how much satisfaction each would bring. Then have them actually pay something for their preferred treat. Now ask them to evaluate the two choices again. The subjective value of the chosen candy will have risen relative to the unchosen one. The valuation of the candy will have increased, but there has been no trade, just choice.
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