Last week a big group of us went to eat at a Dim Sum place in the City. The group was so big that they had to sit us in two round tables, 10 in each. I did not understand how the Dim Sum pricing works. I admit, I consider price before ordering. But we never got to see a menu, there were Dim Sum carts coming by and they kept serving. When it came time to pay, it was $230 for the table.
The ritual of how to spit the check began awkwardly as people trying to figure out what they ate. But in a Dim Sum restaurant when everything was shared, and some of us were vegetarians and did not get to eat much, how would you decide who ate what? The easy decision was to split it. One of us suggested playing credit card roulette. Everyone drops their credit card in the middle and the waitress picks one and charges the full check to that card. We ended up splitting $23 per head. I bet everyone felt equally unhappy.
Dan Ariely, author of the must read book Predictably Irrational, had a piece on exactly this in MarketPlace. Dan’s book Predictably Irrational
is about consumer behavior and our personal decision making. Dan recommends,
Findings from behavioral economics tell us that one person should pay the entire bill and that the person paying should alternate over time. When we pay any amount of money, we feel some psychological pain. We call this the pain of paying. This is the unpleasantness that is associated with forking over our hard earned cash. But it also turns out that this pain does not increase linearly with the cost of the meal.
The extension of the non-linearity argument is, even when one pays in full they don’t feel 10 times as bad as splitting the tab and the rest of the group are all happy. However this leads to a few questions on generality:
- Is the “pain of paying”, in this model, uniform for everybody when it is their turn to pay?
- Did the person who kick starts this feels more pain than the one who comes last?
- Does she feel “more happy” than the rest of the cycle?
- Do people who already paid feel the pain when they see the next person’s total tab is less than that during their period?
- Do people whose turn is coming up start feeling the pain before it is their turn?
I am interested in finding answers to these questions. Generalizing from personal perspective, I would answer YES to all the above questions.
Early in my career, our office had the tradition of having bagels on Fridays. There was a “Bagel Wheel” with employee names written on it. The wheel is passed around and the holder of the wheel is responsibile for buying all the bagels and cream cheese. Then he passed it to next one in random. It was my fourth week and I got the wheel. In a sixty member office I felt the “pain of paying”. I sure did felt pain that was directly associated with the perceived unfairness of paying for 60 people when I had only 4 bagels. I did not look ahead to the future (to make matters worse, the very next week the Organization decided to pick up the weekly bagel tab).
Which scheme do I prefer? I recommend splitting the tab evenly. If you see everyone order a glass of wine, salad, or dessert go ahead and order it. Your marginal cost is much less due to your extra and you end up enjoying the experience more.
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