Thursday, December 2, 2010

Irrational buying behavior : Gold ornaments , Dresses and Cars (and married men!)

I recently went shopping for a gold necklace with my wife. We spent 2 days and about 8 hrs deciding what to buy (and of course 3 shops) - Rs 113000 (thats about 14000 per hour invested)

I went shopping for my car - 3~5 days of internet research ~ 48 hrs of research and test drives. Cost 5 Lakhs (Thats about an investment of 1 hr for every Rs. 10000)

I went shopping for Sarees with my mother and wife and took about 4 hrs - cost Rs. 22000 (Thats about Rs 5500 per hour)

Lets take stock after 2 years  -
gold has doubled (going by last 2 years trend) - annual depletion as % of original value - -100% per year
car is 3 lakhs or depletion is 1 lakh per year or 20% per year
saree - probably Rs 200 or 90% in 2 years but still 90% per year (as it is worth the same across years)

Lets tabulate the results
intensiveness (Rs/hr)
Value loss per
Gold 14000 -100%
Car 10000 20%
Sarees /Dresses 5500 90%

Why do people still spend so much time on Gold purchase (or house purchase) when they need not ? My case rests for ETFs - Gold is best bought as Exchange traded funds (But then... its the same as the (irrational) reason for getting married and and then they do several more irrational decisions to support their first one!!!)

Case rests...

Here is an interesting article about how men behave (like chimps) in reducing loss rather that increasing success and why it leads to irrational buying behaviour

Well this book should be re-labelled as Dummies for Dummies!


Subscribe to A.Karthiks blog

No comments:

Post a Comment