The roots of an irrational decision

[CallMeIshmael]

This stemed from a subthread involving the rationality of voting in one of the 1.3 million "does God exist?" related threads...


Im going to present an overly convoluted situation (the reasons for the odd extras in the story will be made clear at the end) then ask a question that Ive always found interesting


OK, so lets say I woke up today with the thought that it would be just another normal day. However, I hear a knock on my door. I open the door. A normal looking man is standing outside with what appears to be several thousand dollars in bills. He says his name is Tom. Before much else can be said, I hear another man sprinting down the hallway of my dormroom. Somewhat out of breath, he introduces himself as Bob. Both go on to explain to me that they did some internet research, and I have a bottle of Pepsi that has factory production label 13154a. Both say that this number has sentimental value to them (neither says why) and the two proceed to enter a bidding war for my Pepsi bottle. It ends when Tom offers $2300, and Bob fails to counter. I hand Tom the bottle, take the money, and both men leave.


Did anyone in this story make an irrational decision? (I made the story the way I did since we can clearly see that its crazy to value a Pepsi bottle this much, and that no one can say 'its irrational since they could find another Pepsi bottle.' Ie. this is one of a kind)

The problem I see, is: all parties seemed to make technically rational decisions. Tom valued the bottle at greater than $2300, Bob and I valued it at less.


We cant say that Tom valued it at less than $2300, however, it seems so reasonable to want to say he SHOULD have valued it at less. But, can we really start ascribing our own subjective viewpoint of what something should be valued at to others?

However, if we are unable to ascribe these "standard values" to things, can we ever really say any decision anywhere is irrational?



(note: assume for this discussion that there is no magic property to the bottle. There is no reason to believe that they are going to use it in one of those "under the cap" type contests. Assume they just really wanted that bottle)

[Sephus]

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However, if we are unable to ascribe these "standard values" to things, can we ever really say any decision anywhere is irrational?


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i'd say that in the context of a game where goals are clearly defined, then yeah you can say some decisions are irrational.

in real life, though, it can be hard to tell the difference between making a decision that hurts your goals and making a decision that reveals alternate or additional goals.

if you can never really know what anyone (even yourself) is "trying to do," then it doesn't seem quite right to call someone's decisions "irrational."

if you make a lot of assumptions for the sake of convenience, though, i think it makes sense to use it.

[gull]

Hume pointed out something similar. Goals cannot be illogical or irrational; only your means to achieve them.

[soon2bepro]

Close the door and tell them you'll be right back. Take 2 minutes to google it up and see how much it can really be worth to these maniacs.

On your real point though, I quote gull:

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Hume pointed out something similar. Goals cannot be illogical or irrational; only your means to achieve them.


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QFT

[gumpzilla]

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We cant say that Tom valued it at less than $2300, however, it seems so reasonable to want to say he SHOULD have valued it at less. But, can we really start ascribing our own subjective viewpoint of what something should be valued at to others?

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Sure, I think you can. His decisions are rational given the valuation, but the stated criterion for valuation - sentimental value - seems inherently non-rational by nature. Thus, I think you could criticize his behavior as being irrational.

Similarly, I think you can find a lot of cases where people are making irrational decisions because they are operating from faulty premises. (One could argue that they are still behaving logically but just incorrectly, but for the purposes of your argument I think they are the same thing.) To cast it in your model, Tom might be wanting to purchase the Pepsi bottle because he knows serial number 13145a can be redeemed for $10,000. To cast it in a more real-life style, somebody might invest in a business because of drastically wrong assumptions about the desirability of their product to their intended audience, like opening up a bar in a Muslim neighborhood.

[einbert]

I like this story a lot.

I think Tom is usually irrational here, but we can come up with a case where it is rational to do this. First we have to assume that the marginal utility for Tom to lose the $2300 is approximately the same as the marginal utility of gaining the pepsi bottle. This seems impossible, BUT if Tom is inifinitely wealthy then they are in fact both equal to 0EV.

What this leads us to is to realize that to some people, sentimental value of an object (however strange it might seem to us) can be worth infinite amounts of money. If you examine your life I think there are things that you would not trade for any amount of money, although they might seem more worthwhile to you than a can of pepsi. For example, would you for any amount of money undergo an operation to become a woman permanently?

So while we don't have an empathic way to relate to Tom's passion for this pepsi, we do realize that certain things are precious to us and we would pay ridiculous amounts of money to keep them.

In conclusion, Tom could be acting completely rationally, but probably is just nuts.

[Siegmund]

My immediate reaction is that Tom and Bob have some money that is either hot and marked or counterfeit, and are really eager to dump some of it on some random bystander who can take the heat.

That aside, it sure looks like each person has done what, from his own perspective, was rational, though if there is nothing funny about the money or the bottle, Tom and Bob have very unusual perspectives.

[Borodog]

Welcome to Austrian economics.