>

The "no urgency" thing sidesteps the issue, I think.
(Disclaimer, I'm not driving an hour to save $10 for anything).
But if I need something now, am I driving 5 minutes to save $49? Yes... in all cases.
However, if it is a big ticket item, and there is no urgency, am I jumping on a $49 sale? No, because big ticket items essentially always have significant sales at one point or another. I'm probably losing a significant amount of money by not patiently waiting for a good one.
For an inexpensive item, it's the opposite. Under this example, I'll never get a better deal on what I need. Therefore the money saving thing to do is buy it now.
/u/Farbio708 (OP) has awarded 3 delta(s) in this post.
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Please note that a change of view doesn't necessarily mean a reversal, or that the conversation has ended.
^Delta System Explained ^| ^Deltaboards >


You want to buy a tractor. It's 50000$. You're planning on getting it, but there's no urgency. You're at home and get a notification that the tractor is on sale for 49,951$. Do you drive 5 minutes up to the store to get it? Probably not.

I don't understand. If I have the option to spend $50000 or $49951, and the latter only requires a 5 minute drive, then of course I would take the latter.
Of course, in real life, the sale on the hat is unlikely to last long - either because the inventory will be bought, or the store isn't particularly keen on running a 98% off sale in perpetuity. Similarly, the tractor is likely to have larger sales in the future if they aren't all sold. Those factors would make a real life person more likely to go get the hat now and wait on the tractor, but this hypothetical isn't intended to take future pricing into account. It's purely a hypothetical that assumes you get a $49 discount if you drive 5 minutes. >

Okay, hypothetical 2 is probably what I should have led with:
so you go to the store to buy a tractor for 50k and suddenly its 10$ more. do you buy it?
now u go to store to buy a 50c gum and its suddenly 10$ more. do you buy it? >

I maybe buy the tractor, I don't buy the gum. However, this hypothetical is asking a different question than the hypothetical in the OP.
It's likely that somebody values gum more than 50 cents, but less than $10.50. It's unlikely that a person values a tractor more than $50000, but less than $50010.
The original hypothetical assumes that you are willing to purchase the items at their original prices, and lowering the price from there obviously doesn't make a rational consumer unwilling to purchase them at the new price. >

This is probably why the original example is also only $2k and not $20k. When these small increments don't make a dent, the value isnt perceived differently. You can probably swing several hundred dollars in either direction for a $50k tractor or car before someone changes their mind. But even at $2k, someone might jump at $10 off its something they were already going to buy anyway. >

The point of the original example is that it's irrational to not perceive the values differently. >

Right I understand that. But the point is also that humans aren't necessarily rational. 
My point was agree with yours about the original price point. I genuinely can't remember if the car I want is listed at $49,999 or $49,900 or even $49,499. They're all basically the same. They're all "about $50k". So another $49 one way or the other doesn't matter. I value the original price of that vehicle somewhere between $49k and $51k. 
But that swing doesn't hold true for gum.
I think another issue is in the frequency of purchase. Both a phone and TV are things you don't purchase that often, so sure, you should be looking at those $10 the same. But a hat vs a tractor? I will probably buy 10 hats (or if you're multiple husband, 50 hats) by the time I buy a second tractor. So you can't treat these the same in terms of perceived value. I can also pick from thousands of other hats if this one didn't work out, but my options for tractors are way more limited. >

I think I read the same textbook. The example wasn't about "running out to buy something on sale." It was about whether or not to go to the store across town instead of the one near you. 
If you're already planning to buy the item, and the only question is "is it worth the extra gas money to drive across town to save $10," then it really doesn't matter if the item is expensive or not. 
Your extra examples weren't relevant, because in both cases you're spending money you don't need to be spending. >

I put the exact situation in the first part of the post. yes.

Your extra examples weren't relevant, because in both cases you're spending money you don't need to be spending.

you will be spending the money eventually... >

My point is, these are entirely different situations. In the first examples, you've already decided to buy it today, and the only question is where to buy it.
In the second example, you haven't already decided to buy it today; so when you see the sale, you have to decide if it's worth changing your plans, making arrangements for the money, etc. >

okay then use the tractor-gum analogy i gave elsewhere: you go to buy tractor. its 10$ more than normal. do u buy? now go buy a 50c gum and same thing. do u buy? >

That's still not the same thing. Deciding whether to buy something on sale really doesn't have anything to do with cost-benefit analysis. The textbook example was about whether or not to spend resources driving in order to take advantage of the sale. 
Please have your professor explain this to you. This is only Chapter 1. >

or how about you explain why this distinction matters. >

If you have decided you will buy today, all that's left to do is find the best deal. Once all possible deals are on the table, you can cost/benefit analyse them to see where you buy.
If you want to buy something eventually, but not necessarily today, then looking at all offers available today doesn't provide all possible deals. You don't have the constraint of buying today, so there's the possibility of a better deal arriving tomorrow, or the desire of buying disappearing in the future. You don't have to make a choice among the currently available offers, so there's more to it than selecting the best from a list. >

But don’t you also have the possibility that the deals you have today won’t be available tomorrow/go higher? I often face this buying pressure when investing. I don’t need to buy today, but also don’t want to miss out on gains. Quite the pickle. >

That sort of stuff gets abstracted away in thought experiments like this. >


In both cases, you're saving 49$, but clearly one is more compelling than the other. I don't think this is irrational. I think it's an appropriate assessment of the change in value

You haven't actually provided evidence for that, or challenged the original example, you just repeated that this is what people would intuitively do.
Which is the point of the example. People are irrational. They would save $10 on the phone but not save the exact same amount on the TV.
They would save $49 on the hat, but they wouldn't bother to save the exact same amount on the tractor for the exact same effort, because they care more about the perceived feeling of value, than about the actual tangible amount. >

I think the problem is you're changing a lot more than you intend to in your example. In both cases, you add the caveat "you're planning on getting it but there's no urgency". But this really doesn't capture the actual differences between buying a hat and a tractor. You can't just swing by and get a tractor and stash in your closet until you need it. There's just no way getting around that the act of acquiring a tractor is a much bigger deal logistically than getting a hat. So you're weighing that cost against the $49 dollars of savings, which is why you get your result. This tradeoff isn't present in the economics textbook.
A better example would be if you get a $49 discount by preordering either the hat or the tractor, but the pre-order process requires spending an hour to fill out a survey. In this case, it makes no sense to fill out the survey for the hat but not the tractor. In both cases, it's the same trade of $49 for an hour of your time. This is a lot closer to the example in the economics book. >

i fully agree with what you're saying here. thats my position. basically the textbook example is very specifically restrictive and isolated in its setup, whereas i can easily find examples where the abstracted principle doesnt make sense outside this restricted set of conditions. >


basically the textbook example is very specifically restrictive and isolated in its setup

That's because the textbook was trying to teach you a concept. Physics examples are usually also specifically restrictive and isolated (no air resistance, no friction, spinning of the earth doesn't matter, gravitational pull of the moon doesn't matter, etc.)
Easier to learn the concept being taught when you're not being distracted by several other things that factor into the calculation.
You're saying the equivalent of "Obviously gravity doesn't accelerate all things equally, I could drop a feather and a bowling ball and the ball would drop first. The textbook examples of two cannonballs of different weights or the feather and hammer on the moon are just specifically restrictive and isolated in its setup." >

yes >


You're saying the equivalent of "Obviously gravity doesn't accelerate all things equally, I could drop a feather and a bowling ball and the ball would drop first. 

Okay but you understand that this is wrong, right? >

explain >

Oh hi, just saw this.
Gravity does accelerate all things equally. It's an example of a counterintuitive principle of physics that people "feel" is wrong.  People feel that heavy objects should fall faster because gravity will "pull" them more, because they weigh more, but that's not true.
That's what Galileo was doing up the leaning tower (or so the story goes anyway); dropping off different objects to see if they hit the ground at the same time, regardless of mass.  The more intuitive (and older) theory was that a heavier object falls faster; this theory is wrong.
Of course, there are other forces, besides gravity, that can act on an object.  Air resistance being one of them. For most objects, it's negligible. A tomato, an iPhone, a canon ball and, idk, a car, dropped from 10ft, will hit the ground at pretty much exactly the same time for instance.  A feather, or a piece of paper, are different, not because gravity affects them any differently, but because they have a lot of air resistance, enough to actually meaningfully slow them down; that's why they float around the way they do on the way down.
Intuitively, most people feel that heavier things fall faster. If you ask a kid "if I put a really heavy weight in this ball, and drop it again, from this height, would it fall faster?", they'll say "yes". And if I say "and what if I put an even heavier weight in it, would it fall faster?" again, they'll say "yes".  "And what would fall faster, this ball, or a truck?", they'll say "the truck! of course!". "And would it be much faster, or a little bit faster?", "much faster!".  These are very intuitive, but wrong.  And at these distances, for these objects, air resistance doesn't come into it. They will be landing at (pretty much) exactly the same time as each other.
So, if in response to the textbook explaining how gravity works, and demonstrating the concept that, counterintuitively, gravity accelerates all objects equally, and that it doesn't matter how heavy you make something, it simply won't fall faster than 9.81m/s^2, even though that feels wrong, if someone says:

"Obviously gravity doesn't accelerate all things equally, I could drop a feather and a bowling ball and the ball would drop first."

then they're saying a dumb, wrong thing. Not only have they not understood the concept that they're being taught, they even think they're being smart by "seeing through" the textbook's "obviously" wrong example. Actually, all they've done is not understand the lesson at all, and introduce confounding variables that obscure the concept in order to "disprove" it. They've not understood the concept they're being taught, and yet they think they have provided a counterargument to it, one that shows how obviously wrong it is. >

thanks for the response. I wouldn't necessarily say a response like that is stupid, because someone could just be unaware of air resistance. a better analogy, perhaps, is if the physics book seemed to imply that anything you drop will hit the ground at the same time, to which someone would point out the counterexample of a feather, thus leading them to the conclusion that there are more variables at play, but yes the core principle makes sense. i think thats how i would treat the economics situation im in. obviously, i understand the superficial idea, but i challenged the implication. it should be clear and easy to respond to my challenge by saying the equivalent of 'yes, air resistance exists, but this was strictly talking about an instance of limited variables to make the basic point about acceleration.' Instead, it seems like people do tend to extrapolate the superficial principle to instances where it no longer applies, ignoring the complexity, and thats the issue. because now there are people essentially denying that the feather would drop slower, because they're so fixated on the idea of gravity accelerating all things equally, when instead they should recognize the distinction. what led me to make this post was exactly that—people weren't even recognizing the distinction i had found, thus further making me question whether the book was actually just incorrect or if I was simply wrong >

Imagine you have a shopping list. You MUST buy the 2 items on your list and you must buy them today in order to meet an important deadline.  
One item is office paper. There are two stores in town that sell it: 
Store A is across the street - sells for $50.
Store B is 10 minute drive - sells for $40.  
The second item is a new heavy duty office printer/scanner. There are again two stores that sell it:
Store X is also across the street - sells for $5000.
Store Y is 10 minute drive - sells for $4990.  
Assuming the 10 minute drive cost of gas is negligible (maybe a buck), wouldn't it make equal sense to drive both distances to save the $?  
This is what the textbook example was describing. Any variance in this scenario changes the best course of action entirely. I.e. if there is no urgency to making the purchase, if the purchase is not really necessary, etc. >

Lazily, I'm going to award the !delta here even though others have also brought this up, just as a reference for anyone else who may be interested.
Basically, as you say, the economics textbook provided a scenario with very restricted/specific conditions, and then used that to demonstrate its point that relative change in value doesn't matter, but rather absolute/total change. The broader point of total cost vs benefit actually maps onto my scenarios: 49$ off a 50$ hat absolutely obliterates most of the total cost, whereas 49$ off a 50,000$ tractor barely dents it. Thus, in the latter situation, most of the cost in the tractor is retained, and thus it makes logical sense to not be that compelled by this change in value. HOWEVER, at a superficial level, one can still say that 49$ was saved in either case.
So I still disagree that acting to save 49$ on the hat necessitates that I also act to save 49$ on the tractor (to be logically consistent), because that requirement only makes sense if the restricted/specific conditions of the hypothetical are maintained as well. It seems clear to see that the underlying principle of 'acting to save x' does not necessarily maintain when the conditions are different. >

I think something implicit here that needs to be mentioned outright is that $1 for that $50 hat is probably the best deal you'll ever see on that hat. So it makes sense to jump on the deal. 
Versus the tractor being $49 off? If it's not urgent, you might as well wait and see if a better deal comes. There's a possibility you'll save a lot more by waiting. 
That's why the conditions matter so much. $49 isn't the same $49 anymore if in one case it's an unheard of deal and in the other case it might get better. That's why we need restrictions for the textbook example to work. If we somehow knew that the tractor would never go on sale again, then it should be worth just as much to snatch that $49 deal as with the hat.
In the gum analogy, it totally depends on how badly you need that gum. Say you're on your way to a first date and you realize your breath stinks and there's no time to go home and brush your teeth. That gum is your only hope at not ruining the date? Then yeah I'd pay $10.50 for it. But if there's no rush and you can wait for a better deal somewhere else? It would be rational to wait. 
In the end, it's about getting the best deals and ending up with the most total value. That value includes the restrictions on when you need things. >

Not OP, but this is a great point. Time constrained deals matter! >

You're acting as if the total percentage of the cost is relevant. Why though? Either way you'd have $49 more in your bank account than you would have otherwise. And that $49 will spend just as well.
You're falling into the fallacy. "The price has hardly changed." But that's not what actually matters, what actually matters is the dollar amount. Saving 99% vs 1% doesn't matter because you don't spend percentage points, you spend dollars >

this entails the absurdity of you either A) not picking up the hat for 1$, or B) you jumping on the opportunity to save 49$ off a 50,000$ tractor. neither of which make sense to me. >

Just because it's absurd doesn't mean that it's not rational, it just means that humans are so irrational that rationality feels intuitively absurd. >

in this case absurd is meant to represent an irrational conclusion >

Yeah but it doesn't, you just keep insisting that people would obviously make the different choices, but you don't engage with what exactly makes that rational, if not a material benefit. >

okay, so is it irrational to not want to buy 50c gum for 10$ if you would otherwise pay 10$ more for your 50,000$ tractor, assuming in both cases you showed up to the store to buy them? >

Let's say there are two stores (and you only have time/gas to go to one of them). You need a 50k tractor and 10c gum.
One sells the 50k tractor for 49000, but in order to get that deal, you need to buy the 10c gum at $100.
The other sells the 50k tractor for 50k and the 10c gum for 10c.
Which one do you go to? >

the former >

okay. Let's change it to 50k tractor for 49900.10 and 10c gum for 100. Would it matter which store you went to? >

dont think so >

You're really cherry-picking your scenario.
What if I do need the tractor urgently, and it's not going to cost most more than $49 to buy it from the seller that has it for less?
What if we replace $49 with $1,000 and replace "a hat" with a 75" 4k OLED TV?
I could get the TV practically for free (say 99% off), but I'm perfectly happy with my TV and don't want to deal with the hassle of getting a new one and setting it up.  Conversely, my tractor is costing an arm and a leg in repairs as it ages, and new ones never go on sale.  I'd be a fool not to take advantage of a rare sale and get something that will help me perform my job for years to come.
Point being: it can be rational to jump.  It can be rational not to jump.  There's more than just percentages to look at. >

Ago to op profile 
His last 4 cmv all come across with this same bulkshit 
He gets his viewed disproven but decides to flail about grasping for straws and refusing to ultimately define the things he wants go debate >

That doesn't sound like the economics books I used, but I don't have them on hand, so who knows, maybe I'm irrational and forgetful to boot. 
The books I do remember also touched on opportunity cost, on the fact that not all actors are rational, and that different different actors value a given product differently depending on both rational and irrational factors. 
An example like the one you shared would be used to support the fact that consumers are not always acting rationally, that "big number more good," is a real phenomenon. It sort of depends on what level of class you are taking. Are we talking about theoretical economic systems or are we talking about consumer psychology? 
If it's just a claim that "sometimes it's rational to not spend 50k" then I agree with you. That seems like a trivially obvious statement. 
If it's a claim that "All else being equal, if $100 and 50k have the same relative value to you, and we can assume no hidden factors or detriments to either, and you would prefer to save X net value on one but not the other, then you are irrational," then, well, the textbook is correct. 
Later chapters should show, though, that for most people there is quite a large difference in $100 and $50k, and that very rarely is "all else equal." Gotta start with the models though, from the general to the specific. >


If it's just a claim that "sometimes it's rational to not spend 50k" then I agree with you. That seems like a trivially obvious statement.

yes, i think thats on track with where im going

If it's a claim that "All else being equal, if $100 and 50k have the same relative value to you, and we can assume no hidden factors or detriments to either, and you would prefer to save X net value on one but not the other, then you are irrational," then, well, the textbook is correct.

well the value assessment is itself a consideration here, so exactly. if we isolate only this ONE consideration and ignore everything else, then it makes sense at a theoretical level, but the implication is as i described in my example, where taking into consideration change in relative value is apparently irrational, period. it seems as though I agree with the theoretically restricted version, but not the more nuanced, realistic perspective that does involve pondering the change in value.
people jump to saying 'book example says u will buy it,' which is why i used the hat example without urgency, but this is much more obvious if you say something like "would you buy the 50,000$ tractor still if it suddenly raised by 10$? if so, then you must also buy the 50 cent gum that raises 10$ too. otherwise, you have to quibble over the 10$ on your tractor." >

But theres tons of differences between why you'd buy a specific tractor and why you'd buy a specific pack of gum 
If there were tons of shops in the area selling tractors for $10 cheaper and it didn't matter which one I bought, then yes I'd obviously buy the cheaper tractor 
If the $10.50 gum was something I needed to make a living and I had to travel for hours to get to the next gum store then yes I'd buy the more expensive gum >

Right, exactly, that's why it's a very bad example. >

This is textbook example of irrational economical choice because while intuitively you think relative price change, economically speaking $50 is $50 no matter how you earn/save/gain it. >

can you respond to the gum analogy then plz >

What gum analogy? It's not in your post that I replied. >

so you go to the store to buy a tractor for 50k and suddenly its 10$ more. do you buy it?
now u go to store to buy a 50c gum and its suddenly 10$ more. do you buy it? >

Is there an other store that still sells the product with old prices? If not I really don't have a choice other than to pay the higher cost.
But this analogy is flawed in other significant way. Tractor is a durable good meaning you will use it for decades. So the cost increase is only a buck per year. But gum is consumable that you will use for hour or so. Now the price increase in a year is huge. >


If not I really don't have a choice other than to pay the higher cost.

you could...choose to not buy it?
the point is that there are distinctions and it's not a universal principle >

Did you read my second paragraph?
And original example was "would you travel to save 10" meaning there is option to pay more. >

The key difference between the book example and your variant is the chances of weirdness.  If I go to buy a hat and it's $1 instead of $50, that probably won't last.  The fact that it's a large percentage change means that it's unlikely that the hat can be made profitably for $1 and so I can assume that if I return in a week it'll be above $1.  Whereas the fact that the tractor is a small percent decrease means they are still making money at the lower price.  Maybe it'll be even cheaper in another week.
Similarly maybe a week from now I won't need a hat or a tractor.  Let's call that 5% chance.  So if I am saving 95% off the cost, that 5% chance is ok.  But if I don't need that tractor after all and I'm only saving 0.1% that is an important consideration.
So "rush out now vs wait til I need it", the percent savings matter.
But these factors don't apply if I'm buying right now and it just depends how far I'm driving.  So the percent savings doesnt have the same relevance in that situation. >

You're considering potential, not actual savings. The potential to save more in a sale that could possibly happen in the future is greater on the tractor. 
Discounting any future sale, you will be money ahead to make the purchase now. Within the constraints of the situation posed, the sales are actually equal. 
It is actually irrational to expect something more when nothing more is promised. >

So in example 1, you jump up and go to the store to buy an item you need for 49$ cheaper.
Then, in example 2, you jump up and go to the store to buy an item you need for 49$ cheaper. 
Using the usual assumptions foe these examples (these are the best possible prices and you cannot negotiate) then yes they are exactly the same. >

The key there is that you are 'thinking' of buying a tractor. A 98% discount in a hat is enough to push you over your hesitance, but a .1% on the tractor isn't. Is not about the 5 minute drive.
You would definitely buy the tractor in a dealership that is 5 min further if the tractor is 50$ cheaper, and you are already out to buy a tractor. >

i agree with this. my point is that the principle doesn't carry over >

Well, I don't know what principle you refer to, as I would not drive 1h to save 10$ on a phone, or in anything (unless I intend on buying many units, but then it's no longer 10$). >

if we remove all of the extra information to simply get to the end result/benefit, it looks like this:
scenario 1: you save $49
scenario 2: you save $49 
it's the same thing >

You are completely ignoring the point in the first example from economist text books by making it a 5 minute drive. You're basically making the time/travel cost irrelevant. 
Let's say you make 20 bucks an hour, if you drive an hour to save 10 bucks you're at a net negative especially after you factor in gas and wear on the car. It doesn't matter if the item was free and normally 10 bucks or if the item was 500,000 bucks and is now 499,990 dollars you're still losing money by getting the sale. 
Assuming that the time/travel is free the reason jumping on a hat that's 1 dollar instead of 50 makes sense and jumping on a tractor that is 49,951 instead of 50,000 doesn't is because a better sale is likely to occur on the tractor, if for some reason you knew for a fact that the tractor would never be cheaper then it would make just as much sense to run out and buy it than it would the hat.
Conversely if an item is 50% off regularly there's no reason to rush out and buy it, a lot of gamers suffer from sale fatigue when looking at steam sales for example, they notice the game they want being repeatedly on sale for 20-80% so they have reason to believe it'll be on sale again in the near future perhaps even a better sale and if they have a backlog they are not likely to buy it even if the sale is good for the sole reason they know it'll be on sale again. It's more about the rarity of the deal than it is how good the deal is by %. >

The main thing that confounds these decisions is opportunity cost. I suppose it's also emotionally compelling, but that's not a good rational reason to decide, unlike these:

What were you otherwise going to do with that 10 minutes?
What were you otherwise going to do with that $50,000? 
Cost of depreciation of buying the item now rather than later. 

In the first case, $10 might be a good deal either way... or not. It is a much smaller fraction of the time investment it will take to buy and take ownership of the tractor. 
In the second case: you can make $125 in a month even just having your $50,000 for a tractor in a 3% APY savings account. You can't do that with the money for a $50 hat. >

There needs to be assumptions or more information given before you can determine if this is rational.
Also, it seems you're confusing how easy something is to rationalize and something being rational. >

Consider the time value of money.
In the phone example, you've decided that one hour of your time is worth $10.
In the TV example, you're saying that one hour of your time is worth more than ten dollars.
How much is your time worth? If it's 10/hr, then why not save $10 on the TV? If it's more than 10/hr, why come out at a "loss" on the phone? You're saying that the same amount of your time is not worth the same amount of money, which is irrational.
Using your examples, you're saying that your time is worth an effective hourly rate of 588/hr (saving $49 for five minutes of work) in some cases but not in others. You're behaving differently in the face of the same overall outcome, which is irrational. >


You're planning on getting it, but there's no urgency.

The key here isn't your willingness to drive 5 minutes for 50$, it's your expectation that it could be discounted further. The only reason not to save $50 on a $50K purchase for 5 minutes of driving is if you think you could save more by waiting.
The hat will never be on a better sale than $49 off the $50 tag. That's the cheapest you could possibly get it, and it makes sense to pounce on that deal and save $49. If you don't immediately pounce on that same deal for the tractor, then you're either waiting for a better deal or you're failing to conceptualize that money as already spent despite having already decided to buy the tractor, because in the case where you don't expect future discounts, these scenarios are the same. You have already allocated the funds to these purchases by deciding to get them at full price, any sale is a savings on that money. >

If you have the $50k sitting in your pocket and could just throw the tractor in the back seat and ride home with it, then sure, it would make sense to go grab it when it's a little cheaper.
The reason is hard to imagine jumping on the tractor deal is because buying a tractor is a much longer and harder process compared to buying a hat. You need to carefully budget it out, make sure that the tractor is exactly what you're looking for, there's no problems with it, get the right gas to use, arrange for transportation, find somewhere to store it, etc.
You could make it closer by using a luxury hat that costs $15k as your example instead, but that would still have a different context because if you're the kind of person who can afford to spend $15k on a hat, then you're probably wealthy enough that $50 isn't worth much to you. But then the $50 hat being on sale for $1 is also not worth it for you, so it's still not a matter of percentages but absolute worth.
Basically, the example in the book is good, but you're trying to apply it too strictly to situations where other factors come into play. >


I think it’s an appropriate assessment of the change in value, and the degree to which the value of the item changes is meaningful

The point is would you drive across town for x amount, and showing that the context will make you feel different about the exact same thing for the same amount. Its a hypothetical that’s designed to isolate those two choices: buy it here for $x or drive   across town for a better price.  Theres no better deal coming, prices don’t fluctuate, nothing but those two options.
A rational person would choose the option which gave to them had the highest value over the one that made them feel like they got a meaningful deal. Maybe thet think the drive isn’t worth it, maybe it is, but it would be the dame answer in both cases.
Of course IRL theres a lot more factors, like a 99% sale is rare and you should jump on it immediately, a 1% sale means you may aswell wait for a better price if it’s not urgent . But thats not the point of the experiment, its just a hypothetical example to show people are irrational. >

You (and everyone else in this thread) are looking at this from the book's perspective and not real life.  You basically can't (and normal people would never) look at these two purchases to judge real-life comparative purchases.  And if the book considers it irrational, then people should not be reading that book.
The reason?  It is because most people (sans the uber rich) would use other factors to decide in addition to it just being a percentage of savings or a simple cash delta.
If you are buying something relatively inexpensive, or something that's seen as a commodity, price weighs very heavily into the decision.
If you are buying something very expensive and is going to be used to support some kind of income for you (like a $50K tractor), it isn't all about money in the purchase price.  Which dealer would provide better service? Which has a better reputation? Etc., etc.....
TLDR:  It isn't a two dimensional thing. >

"Change in value" is wrong; this is about a change in cost. Value is up to you: what's the benefit to you to have these items? I don't know.
If you have decided (not merely want) to buy both these items, then saving $49 is the same in both cases, so it's irrational to consider one more compelling than the other. They're the same deal, so buy both now. 
If not, then the hat is more compelling based on the almost zero risk associated with spending $1... unless you have so little wealth that that's expensive for you or you have enough wealth that $50k is equally meaningless to you.
Finally, if you don't really want the hat, then even $1 is a waste of money. Not much of one, generally speaking, but strictly speaking a waste of money. >

I'm sure I'm late, but I'll take a crack at it anyway.  Deciding where to buy something based on price, when to buy something based on price, and deciding whether to buy something at all are completely different calculations.  When you say "but there is no urgency" you are deciding when to buy something.  In the example you gave from the text book the decision whether and when to buy was already made (yes buying and buying today), the only remaining decision was "where" based on price.
The point the book was trying to make might be slightly more clear by tweaking the example.  Let's say you went into a store and bought a tractor for $50,000 and a cell phone for $100.  After you leave the store they call you asking if you will take part in a survey regarding your phone purchase that will take an hour and pay $10.  You can decide yes or no... But would your answer change based on if they said the survey was for the tractor purchase?  If you are acting rationally your answer would be the same in both cases.  The car drive in the original problem is no different.  The only decision is what is your time worth. >

If you drive 1 hour to save $10, you're an idiot, lol. That's at least $15 worth of gas. 
Yeah our little monke brains think that $49 off a car is no big deal because it's a small percentage, but $49 is $49 no matter where you're saving it. >

$ goes in front of the number. >

Not in all countries I assume? >

in addition to what others have said, this is probably against the rules. you don’t actually want your view changed, you just want to flex on chapter 1 of a book nobody read when you should be asking your teacher about it >


The book example assumes you are going to buy the products anyway. If you are willing to drive 1 hour to save $10 on the $100 item, you should also be willing to drive 1 hour to save $10 on the $2000 item. But again, this assumes you are going to buy the items anyway.

my example also entails you will buy them anyways, but that it isn't urgent. >

The issue at hand in either case is 49$. That is your profit in either case. Do you agree? >

at a simplistic level obviously >

You make cheap investments more often so saving money on them can be more meaningful >

can you elaborate? >

You buy a 50k thing once a few years. You buy 50$ things pretty often so when you can get it cheaper you'll take that discount >

Suppose you're going to a store that has both the hat and the tractor. Only, now the tractor is $49,901 -- on sale for $99 off. You need to buy both. Additionally, you can only choose to take one of these two deals. You can either have a hat for 98% off or a tractor for about 0.2% off. Which deal do you take? >

so in either case im saving 99$? >

No, the hat is still $49 off. >

How much other shit have you got to get done today? I find myself paying for convenience more and more as my life gets more hectic. >

well yeah, i can get behind the idea that people act based on emotions rather than logic. im purely going at it from an unrealistic 'if someone were purely logic' perspective >

tbh in a real life situation, I'd get the hat, because it's unlikely to be reduced to less than $1. the tractor is reduced by a comparatively small amount, so I'd wait, since there is a much higher reduction possibility. >

If you could buy multiple hats at $1 and resell them at FMV (let’s say $20 each in bulk), would you?  If not you, some arbitrager would.  And I’m willing to bet hats are a lot more liquid than tractors (you could just undercut someone on Amazon).  If you did this for 100 hats you’d make a solid $1900!
Buying a tractor however is just different:  not as liquid, harder to physically move, the reasons you would buy it are different, etc
This is why your example makes alarms go off in people’s heads.  “This is such an odd example but I can’t put my finger on it…”
In reality it truly is a silly example used to argue a fallacious argument: one in which the dollar amount is the only factor in this purchase. >

Isn’t this just price elasticity of demand? >

This just needs more context. It's obviously nonsense to FOMO into a purchase you wouldn't otherwise do over a 0.1% discount, but you didn't need us to tell you that. What does make sense is to slightly change your schedule to get a 0.1% discount on something you were going to buy anyway. Like, why not do it? >

On paper your argument makes sense and it would be irrational to not jump at the savings regardless. However it ignores reality.
Generally speaking most people making a $50,000 purchase are doing something that's pretty significant to them, a lot of risk is involved and also going to be a ton of logistics involved in having it brought to wherever I need it. All of these things are going to weigh heavily and the small Savings of $49 isn't going to make me jump up and change my plans instead of going with the pace and plan I'm comfortable with. 
If I'm buying a hat, and it's virtually free? Psh theres no risk, let's go. >

Okay change it such that you show up to buy 50c pack of gum at store, and situation B is showing up to buy 50k tractor at store. in both situations, price raises 10$. well, you were ready to make the purchase, no? its just 10$ in  both situations, ain't it? >

Well now you are talking about raising the price.  That's different than  lowering the price.
So suppose that you were at the store and ready to pay $10.50 for gum when someone tells you that it costs 50 cents at another store.  If you decide to travel 5-10 minutes to save the $10 then the same logic makes sense for the tractor.
I suppose another factor could be that if you learn that $10.50 is a ridiculous price for gum you might feel an urge to "punish" the store by not buying there.  Whereas a $10 discrepancy on the tractor means the price is not ridiculous.  This urge to punish might not be irrational if you want to discourage price gouging.  However, I think even there Thaler has this covered.  He explicitly mentions that the suggested retail price of the clock radio is higher than the sale price. >

How much do you value your free time though?
If it takes me an hour round trip to save any amount of money, the savings must make up for gas and the inconvenience of having to go and get it. >

Irrational doesn't mean "bad" or illogical. It just means that behaviour violates the assumptions of complete and transitive preferences that are used to construct economic models.
Of course people don't always behave in accordance with those assumptions. Because people are not rational. But we can sometimes use the assumption of rationality, even if it's a major simplification, to create useful predictions about how people will behave in the aggregate. >

I think those examples are clearly entirely about the monetary cost. They're not supposed to be analyzed as real world dilemmas, they're just a way for you to contextualize the concept to better understand it. 
The real answer is that the monetary cost is not the reason we buy most things, you're only irrational if your entire logical thought process is about the savings and the savings only. It doesn't take into account opportunity costs, or life costs, or even lifestyle costs of owning these items, of being able to purchase these items in the first place. I think it's mostly a misunderstanding. Econ books are there to teach you econ of course. >

Maybe this is worthy of a different post, but I’d suggest there is no such thing as irrational behaviour in economics and anyone who says otherwise should review the first lesson of their undergrad textbook titled “utility functions”. >

Im financing the tractor for the next 10 years.... the TV I am either putting on a credit card or paying cash... >

The issue here is that the chances of me needing a hat in the future are pretty high, and $1 is not a significant amount of money. The chances of me ever needing a tractor are incredibly low, and $49,951 is an enormous amount of money. Spending $1 on a hat I'll probably use is a much more reasonable expense than spending $49,951 on a tractor I'm almost guaranteed to never need. >

Being rich as fuck I wouldn't care about either of those sales.
My point is, context matters. >

Because your opportunity costs are different when evaluating higher prices. When you consider buying a tractor, you think whether to get it or get a truck (or whatever else $50k can get you). $50 has no real significant bearing on that decision.
If someone offered you the tractor for $50k, would you really be adamant about reducing the price by $50? Would the $50 help you get something else that is cool (like a dinner)? Sure, but that was never in your mind to begin with and you can live without it in this massive financial decision of yours.
Whereas with the hat, you perhaps were visualizing whether to keep the $50 (and perhaps get the dinner), or get the hat. Now all of a sudden, you can get the hat and the dinner, so it's a large win since you got to fulfill both at the top things in your head. >

Also 50,000 is a much bigger financial risk than 50 on a hat. As such the saving isn't enough incentive to take on all that risk. >

In the real world this example is subject to other factors. For example, you can’t know that the tractor for $50 less is exactly the same. The warrant might be backed by a less reputable seller. There is additional uncertainty which comes with the last minute one. In the real world, we don’t have perfect knowledge of everything in the market or the product itself. 
But ignoring all of that, you’re better off getting the cheaper tractor. >

In a vacuum yes, 50 bucks is 50 bucks.
However, we don't live in a textbook economics situation. We live in the real world, where just because this makes sense when you look at it without considering anything extra, you don't consider anything besides the things listed.
When you look at an ad for a 50 dollar discount tractor, it is very likely you can do better just by waiting or negotiating. However, for a hat, you're very unlikely to get a better deal.
In the context of budgets that you have set aside for certain expenditures, 50 dollars can be extremely much or extremely little. Spending 50 dollars extra on a plane ticket is very different from spending 50 dollars extra on your lunch, even if both are single expenditures. They're a very different 50 dollars to spend. >

If you buy the tractor on sale, you have money to also buy the hat that is on sale >

It depends why you haven't already bought the item in the first place. If you haven't because you are waiting for a better price then there is a much higher chance of a sale saving you more than $49 for the tractor than the hat. >

The key here is the urgency. It's not about the money saved, but how good the deal is. 0.1 percent off is a deal that is likely to be improved upon. 98 percent off is unheard of. So you rush to get a deal you may never see again, but may wait to see if that tractor was even more discounted. >

It's good business sense to value money even if it isn't an extreme amount. The principle or habit can outweight the feeling of a deal being better or worse than others by saving you money.
However since most people aren't strictly cold calculating machines, and can be offended if they don't percieve an offer to hold value - it's unlikely anyone would give it as an add. >

What attracts most people to discounts is the relative discount. Saving $49 (98% discount ) on a $50 hat is attractive, affordable, and worth it for the fun of buying a hat you like but may only wear a few times for $1 is fun. Most people don't value their time that much. Even at $30/hr a 1 hour drive makes a $1 hat worth it.
A tractor is something that some people need, unless you plan on using a hoe and a shovel. If you've plowed a acre field by hand once, you'll never want to do it again. A tractor is for plowing 10 acres. Plus you make money on the crops you produce and you can write it off as an expense. Saving $50 on a $50k vehicle is a 0.1% savings and immaterial. 
Personally, I naturally love saving money but I also value my free time at $50/hr.
A better example of what I think the book is trying to imply is, "How far would a person drive to save 20% on gas for a 20 gallon tank?" 
I'd  also guess the book is trying to demonstrate marginal utility. The more you make, the less the money is worth to you. Michael Jordan routinely make million dollar bets on the golf course because he has 1700 * million dollars in net worth. 
What people see as wealthy is relative to their peers. At the yacht club, a $1 million dollars net worth is on the poor side.
I used to have a 60 ft yacht and we would do charity events. People would ask what it cost, I'd ask them what they thought it cost.
$50k, $200k, $500k. the answers would vary. I'd just tell them, "Wow, what a Good Guess! You are one smart cookie.". 
The boat cost $1.5 million and  $100k a year in expenses. It would have been rude to tell them that. >

Why is putting any weight into the percentage rational?
If driving an hour to save $10 on a $100 purchase why would that driver become not worth it if the price went up
Either way it’s 1 hour to save $10
It seems like your whole based on your perception of the value of the savings, which sounds irrational to me >

I travelled 15 minutes to buy a 250 leer cap for my truck last week. I’m pretty sure I can sell it for  at least 650 though. Not relevant but I’m drinking >

I do t think it’s irrational; I agree with you. The difference is, people aren’t so much measuring money directly, but their feelings going through the effort of getting that much money. If it takes you 5 months to save up for a $5,000 tractor, then 5 months into saving up, you’re not going to remember nor care if you happened to work $5 worth of overtime or not one day 4 months ago.
But if we’re talking about a $6 hat that could be $5 off, well, if I were offered to go home an hour early but receive the same pay, I’d probably be pretty happy right then even if I wouldn’t even necessarily remember it in 5 month
When I judge the price of something, I personally imagine the effort that goes into earning the money for it. And just as humans can’t tell if there’s 5,000 or 4,995 balloons in a group or not (but can easily discern between 6 and 1 balloons), I don’t care two wits whether I work an hour less over the course of the next 5 months to afford a tractor or not, but if I can work for 10 minutes for a hat vs a whole hour, I’d much prefer the 10 minute period >

One major thing I haven't seen mentioned, is the concept of value existing beyond simply monetary. This boils down to "rational" in economics not meaning the same thing as "rational" in common speech. In economics, it's a term for segregating the value of money from other value sources. But in common usage, "it feels good" is literally a rationale that can be used to declare something as a rational behavior. Rationalizing in economics means to logically justify an action independent of nonmonetary value (such as emotion), in order to see a clearer image of the monetary decisions made. But humans rationalize everything. Every action we take is rationalized, and very rarely are the rationales "coldly logical". 
In other words, it's a vocabulary problem. In economics terms, buying the hat but not the tractor is irrational. In common terms, "the deal on the hat feels good and makes me feel clever" is sufficient rationale for the different action to be considered "rational". >

The "no urgency" thing sidesteps the issue, I think.
(Disclaimer, I'm not driving an hour to save $10 for anything).
But if I need something now, am I driving 5 minutes to save $49? Yes... in all cases.
However, if it is a big ticket item, and there is no urgency, am I jumping on a $49 sale? No, because big ticket items essentially always have significant sales at one point or another. I'm probably losing a significant amount of money by not patiently waiting for a good one.
For an inexpensive item, it's the opposite. Under this example, I'll never get a better deal on what I need. Therefore the money saving thing to do is buy it now. >

Your examples turn a quantitative math problem into a qualitative decision.
In the textbooks' example, you're answering the question: is it worth it for me to drive to the store an hour away, or should I just buy the item at my local store?
You can actually determine exactly how much money you would need to be saving in order for an hour-long trip to be worth it. You can figure out what your car's gas mileage is, and what the cost of gas is, multiplying that by the miles you would need to drive. Throw in some money for wear and tear on your car and for your time spent (if you want). Add it all up and see if it exceeds $10 or not.
In your examples, you have to answer a different question: Do I buy this item now, or do I wait and buy it some other time?
You introduce other factors here, namely your own personal opinion on whether you think this is the best deal that you'll find, or if you want to wait and see if another comes around.
Since you're answering different questions in these examples, it's perfectly reasonable for different factors to need to be considered in each. Also, what's rational when answering one of the questions may not be rational when answering the other one. >


percentage doesn't matter, only total cost.

But time is a part of that cost as well. >

In a world without sales everyone that needed that tractor would be thrilled 
But we know how sales work so we wait for a better sale >

You have presented exactly zero challenge to the prevailing rational economic view.... >

You are not thinking like homo economicus (AKA economic man, thee who makes optimal, rational decisions that are in their self-interest). 
In both scenarios, you have the wish to purchase something - a hat and a tractor. Both the hat and the tractor can be purchased at a $49 discount. Both require a 5-minute commute to do so - the opportunity cost of travelling to get this discount will be the same for both items. Despite this money saving opportunity, you and many others will scoff at the $49 discount on the tractor! It is perceived to be an irrational choice because the savings on the tractor are miniscule compared to its overall cost. However, for economic man, who optimally acts in their own self-interest, this would be a rational purchase. 
I suspect that this phenomenon is related, if not caused by, years of JC Penny "sales", where the entire store's inventory can be had at an artificial 50% discount year-round. >

The book is irrational if they think that, my time, fuel and another variables aren’t important and the only cost and discounts are applying to general cost of item :/ >

I 5hought this was to do with politics an shit i hardly know anything about econdomonics what the fuck is thay shit >

This scenario is not at all comparable to the economic textbook case.
In that case, the question is simply "do I drive somewhere else to save 10 dollars". It is not "do I pay 10 extra dollars for this thing I want".
For example, the relevant comparison would be wanting to buy a stick of gum, seeing it costs 10.50 where you're at, and also knowing you can get it for 0.50 after a short drive. Similarly, you have to be looking at a tractor costing 50,010 where you're at, but 50,000 a short drive away. The idea is that if you're willing to go to the place that sells gum cheaper for the short drive, you should also be willing to go to the place that sells the tractor cheaper for the same short drive since the price difference is the same (let's assume there's no added cost to having to transport the tractor from this place). Because the idea is that if you aren't willing to drive a short distance to save 10 dollars on a tractor, you also shouldn't be willing to do so to save 10 dollars on gum.
The question here has nothing to do with whether you'd be willing to spend an extra 10 on gum vs. a tractor when faced with no other option as depicted in your scenario. It's about whether you'd be willing to drive a short distance to save an equivalent amount of money on either item. Your example doesn't match simply because there is no other store selling gum and tractors for 10 dollars cheaper.
In other words, the economcis case is not saying "you'll be willing to spend an extra 10 on gum because you're willing to spend an extra 10 on a tractor". That only holds if you say "spend 10 more than this other store that is a short drive away". >

Who would drive an hour to get $10 off of anything much less a phone?
How broke are the people in this example? >

This isn’t new thinking.
I posted this comment a couple of weeks ago about a similar thing, covered in the book The Economic Naturalist.
It’s basically about the psychology of the perceived value of the saving, as you mentioned in your post.
Can highly recommend the book, here’s a link (Amazon UK) so you can see the book I’m talking about >

I like that example, but again my issue with the principle still stands, because it doesn't consistently apply beyond very restricted circumstances. The book I read overall claims that total benefit - total cost is what matters. In the instance you provided, only one of the items losing 10$ results in a significant change in the total benefit - total cost evaluation—the one that was more affected by the -10$. Thus, while yes at a superficial level you can view this as saving 10$ to wait 24 hours in both situations, I would say the perceived change in value does matter. We can see this if you change the situation to be the following:
You go to the store to buy gum that you want, but don't need. It's normally 50 cents, but is now 10.50$. Do you buy it or wait 24 hours?
You go to the store to buy a tractor you want, but don't need. It's normally 50,000$, but is now 50,010$. Do you buy it or wait 24 hours?
While, yes, in both situations, it is superficially waiting 24 hours to save 10$ (just as you said in your example), I would argue you don't need to be consistent in your behavior here because only one of these choices is significantly affected by the 10$. Paying 10x more for gum is a ripoff. Paying a fraction of a percent more on a massive tractor purchase is negligible and not worth coming back later for, because the total benefit - total cost has hardly changed.
Then, this is where people step in to say 'your example is different!' That's the point. The principle you've laid out only applies to certain circumstances, and isn't a universal rule. That's basically my only point here. It does seem fair to say that relative change in value is worth considering, which matches with the book's claim about total benefit - total cost being all that matters. It just so happens that the instance my/your book provides is a simplistic example meant to demonstrate an idea that isn't totally able to be extrapolated. >

Agreed >

I'm a bit late but hope you're still reading as I really think this answer will help. I work in trading and thinking of this with a trading mindset is great
To me, this isn't about urgency at all. I disagree because of these two lines:

Do you drive 5 minutes up to the store to get it? Probably. That's a good deal.
Probably not. The price has hardly changed, relatively speaking

You are making up your own thesis on what the fair value of these products are. You are making an inherent assumption that if you wait longer, then you will great a much greater discount on the tractor over time, therefor, the tractor being only $49 cheaper is not a good deal. 
In trading, you have this idea or fair value. If there was a situation where every month a big tractor deal of 20% off comes around guarantee, then my argument would be that the price of $50,000 in the first instance was outright wrong. Infact if there was any chance that there was a tractor sale going to happen (even 1-5% off) then the starting price needs to factor that in. In this case, the $50,000 already prices in the chance of future discounting. If it didn't, I would be the richest tractor trader in the world!
The textbook makes the inherent assumption that $50,000 is the absolute correct price for this item  and your logical misstep (in economic terms) is making the assumption that you will find a mispricing in the future. You absolutely may find a mispriced tractor at greater discount percentage, but that is speculation and your own personal opinion, not an economic certainty.
To summate:

Tractor today price at $50,000 is the fair value price and includes the probability of future discounts
Gum today fair value price is $50 and also includes probability of future discounts. 
Book is saying $49 mispricing on Tractor today price Vs Gum today price should be treated the same
Assumption that mispricings will not occur further
I agree with book as the today price of tractor already includes the probability of future discounting and $49 is the same anywhere

Happy to discuss more and hope that helps >


In both cases, you're saving 49$,

Exactly

but clearly one is more compelling than the other

Why?
Explain the difference in your bank account or wallet if you get $49 off of something that costs $100 Vs $10,000. >

I think it depends on products you compare, a hat and a tractor are at totaly different extreme ends of the spectrum. The value in the amount you save is depended on the product and its discount and only closely corellated products can be compared.
The possibility of a hat going from 50$-1$ is extremely small and if you dont buy it you might never get that chance again.
The 50$ discount on a 50000$ tractor is meaningless because you know that discounts on such high value products can potentially go much higher.
There is nothing more to potentially save by buying a 1$ hat that was 50$ because it cant go any lower but there is a lot more to potentially save by waiting for a better and more realistic discount on a $50k tractor (which would realistically be in the thousands). >

yikes >


If there is no urgengy, I would gambel for a bigger discount in the furture, while in case one, 1 dollar for a 50 dollar hat, I would not gambel. >

Y’all just helped some kid pass his first Econ test in the spring semester >

so excited to pass the econ test that asks whether i would buy a 10$ pack of gum >

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You want to buy a tractor. It's 50000$. You're planning on getting it, but there's no urgency. You're at home and get a notification that the tractor is on sale for 49,951$. Do you drive 5 minutes up to the store to get it? Probably not.

I don't understand. If I have the option to spend $50000 or $49951, and the latter only requires a 5 minute drive, then of course I would take the latter.
Of course, in real life, the sale on the hat is unlikely to last long - either because the inventory will be bought, or the store isn't particularly keen on running a 98% off sale in perpetuity. Similarly, the tractor is likely to have larger sales in the future if they aren't all sold. Those factors would make a real life person more likely to go get the hat now and wait on the tractor, but this hypothetical isn't intended to take future pricing into account. It's purely a hypothetical that assumes you get a $49 discount if you drive 5 minutes. >

Okay, hypothetical 2 is probably what I should have led with:
so you go to the store to buy a tractor for 50k and suddenly its 10$ more. do you buy it?
now u go to store to buy a 50c gum and its suddenly 10$ more. do you buy it? >

I maybe buy the tractor, I don't buy the gum. However, this hypothetical is asking a different question than the hypothetical in the OP.
It's likely that somebody values gum more than 50 cents, but less than $10.50. It's unlikely that a person values a tractor more than $50000, but less than $50010.
The original hypothetical assumes that you are willing to purchase the items at their original prices, and lowering the price from there obviously doesn't make a rational consumer unwilling to purchase them at the new price. >

This is probably why the original example is also only $2k and not $20k. When these small increments don't make a dent, the value isnt perceived differently. You can probably swing several hundred dollars in either direction for a $50k tractor or car before someone changes their mind. But even at $2k, someone might jump at $10 off its something they were already going to buy anyway. >

The point of the original example is that it's irrational to not perceive the values differently. >

Right I understand that. But the point is also that humans aren't necessarily rational. 
My point was agree with yours about the original price point. I genuinely can't remember if the car I want is listed at $49,999 or $49,900 or even $49,499. They're all basically the same. They're all "about $50k". So another $49 one way or the other doesn't matter. I value the original price of that vehicle somewhere between $49k and $51k. 
But that swing doesn't hold true for gum.
I think another issue is in the frequency of purchase. Both a phone and TV are things you don't purchase that often, so sure, you should be looking at those $10 the same. But a hat vs a tractor? I will probably buy 10 hats (or if you're multiple husband, 50 hats) by the time I buy a second tractor. So you can't treat these the same in terms of perceived value. I can also pick from thousands of other hats if this one didn't work out, but my options for tractors are way more limited. >

I think I read the same textbook. The example wasn't about "running out to buy something on sale." It was about whether or not to go to the store across town instead of the one near you. 
If you're already planning to buy the item, and the only question is "is it worth the extra gas money to drive across town to save $10," then it really doesn't matter if the item is expensive or not. 
Your extra examples weren't relevant, because in both cases you're spending money you don't need to be spending. >

I put the exact situation in the first part of the post. yes.

Your extra examples weren't relevant, because in both cases you're spending money you don't need to be spending.

you will be spending the money eventually... >

My point is, these are entirely different situations. In the first examples, you've already decided to buy it today, and the only question is where to buy it.
In the second example, you haven't already decided to buy it today; so when you see the sale, you have to decide if it's worth changing your plans, making arrangements for the money, etc. >

okay then use the tractor-gum analogy i gave elsewhere: you go to buy tractor. its 10$ more than normal. do u buy? now go buy a 50c gum and same thing. do u buy? >

That's still not the same thing. Deciding whether to buy something on sale really doesn't have anything to do with cost-benefit analysis. The textbook example was about whether or not to spend resources driving in order to take advantage of the sale. 
Please have your professor explain this to you. This is only Chapter 1. >

or how about you explain why this distinction matters. >

If you have decided you will buy today, all that's left to do is find the best deal. Once all possible deals are on the table, you can cost/benefit analyse them to see where you buy.
If you want to buy something eventually, but not necessarily today, then looking at all offers available today doesn't provide all possible deals. You don't have the constraint of buying today, so there's the possibility of a better deal arriving tomorrow, or the desire of buying disappearing in the future. You don't have to make a choice among the currently available offers, so there's more to it than selecting the best from a list. >

But don’t you also have the possibility that the deals you have today won’t be available tomorrow/go higher? I often face this buying pressure when investing. I don’t need to buy today, but also don’t want to miss out on gains. Quite the pickle. >

That sort of stuff gets abstracted away in thought experiments like this. >


In both cases, you're saving 49$, but clearly one is more compelling than the other. I don't think this is irrational. I think it's an appropriate assessment of the change in value

You haven't actually provided evidence for that, or challenged the original example, you just repeated that this is what people would intuitively do.
Which is the point of the example. People are irrational. They would save $10 on the phone but not save the exact same amount on the TV.
They would save $49 on the hat, but they wouldn't bother to save the exact same amount on the tractor for the exact same effort, because they care more about the perceived feeling of value, than about the actual tangible amount. >

I think the problem is you're changing a lot more than you intend to in your example. In both cases, you add the caveat "you're planning on getting it but there's no urgency". But this really doesn't capture the actual differences between buying a hat and a tractor. You can't just swing by and get a tractor and stash in your closet until you need it. There's just no way getting around that the act of acquiring a tractor is a much bigger deal logistically than getting a hat. So you're weighing that cost against the $49 dollars of savings, which is why you get your result. This tradeoff isn't present in the economics textbook.
A better example would be if you get a $49 discount by preordering either the hat or the tractor, but the pre-order process requires spending an hour to fill out a survey. In this case, it makes no sense to fill out the survey for the hat but not the tractor. In both cases, it's the same trade of $49 for an hour of your time. This is a lot closer to the example in the economics book. >

i fully agree with what you're saying here. thats my position. basically the textbook example is very specifically restrictive and isolated in its setup, whereas i can easily find examples where the abstracted principle doesnt make sense outside this restricted set of conditions. >


basically the textbook example is very specifically restrictive and isolated in its setup

That's because the textbook was trying to teach you a concept. Physics examples are usually also specifically restrictive and isolated (no air resistance, no friction, spinning of the earth doesn't matter, gravitational pull of the moon doesn't matter, etc.)
Easier to learn the concept being taught when you're not being distracted by several other things that factor into the calculation.
You're saying the equivalent of "Obviously gravity doesn't accelerate all things equally, I could drop a feather and a bowling ball and the ball would drop first. The textbook examples of two cannonballs of different weights or the feather and hammer on the moon are just specifically restrictive and isolated in its setup." >

yes >


You're saying the equivalent of "Obviously gravity doesn't accelerate all things equally, I could drop a feather and a bowling ball and the ball would drop first. 

Okay but you understand that this is wrong, right? >

explain >

Oh hi, just saw this.
Gravity does accelerate all things equally. It's an example of a counterintuitive principle of physics that people "feel" is wrong.  People feel that heavy objects should fall faster because gravity will "pull" them more, because they weigh more, but that's not true.
That's what Galileo was doing up the leaning tower (or so the story goes anyway); dropping off different objects to see if they hit the ground at the same time, regardless of mass.  The more intuitive (and older) theory was that a heavier object falls faster; this theory is wrong.
Of course, there are other forces, besides gravity, that can act on an object.  Air resistance being one of them. For most objects, it's negligible. A tomato, an iPhone, a canon ball and, idk, a car, dropped from 10ft, will hit the ground at pretty much exactly the same time for instance.  A feather, or a piece of paper, are different, not because gravity affects them any differently, but because they have a lot of air resistance, enough to actually meaningfully slow them down; that's why they float around the way they do on the way down.
Intuitively, most people feel that heavier things fall faster. If you ask a kid "if I put a really heavy weight in this ball, and drop it again, from this height, would it fall faster?", they'll say "yes". And if I say "and what if I put an even heavier weight in it, would it fall faster?" again, they'll say "yes".  "And what would fall faster, this ball, or a truck?", they'll say "the truck! of course!". "And would it be much faster, or a little bit faster?", "much faster!".  These are very intuitive, but wrong.  And at these distances, for these objects, air resistance doesn't come into it. They will be landing at (pretty much) exactly the same time as each other.
So, if in response to the textbook explaining how gravity works, and demonstrating the concept that, counterintuitively, gravity accelerates all objects equally, and that it doesn't matter how heavy you make something, it simply won't fall faster than 9.81m/s^2, even though that feels wrong, if someone says:

"Obviously gravity doesn't accelerate all things equally, I could drop a feather and a bowling ball and the ball would drop first."

then they're saying a dumb, wrong thing. Not only have they not understood the concept that they're being taught, they even think they're being smart by "seeing through" the textbook's "obviously" wrong example. Actually, all they've done is not understand the lesson at all, and introduce confounding variables that obscure the concept in order to "disprove" it. They've not understood the concept they're being taught, and yet they think they have provided a counterargument to it, one that shows how obviously wrong it is. >

thanks for the response. I wouldn't necessarily say a response like that is stupid, because someone could just be unaware of air resistance. a better analogy, perhaps, is if the physics book seemed to imply that anything you drop will hit the ground at the same time, to which someone would point out the counterexample of a feather, thus leading them to the conclusion that there are more variables at play, but yes the core principle makes sense. i think thats how i would treat the economics situation im in. obviously, i understand the superficial idea, but i challenged the implication. it should be clear and easy to respond to my challenge by saying the equivalent of 'yes, air resistance exists, but this was strictly talking about an instance of limited variables to make the basic point about acceleration.' Instead, it seems like people do tend to extrapolate the superficial principle to instances where it no longer applies, ignoring the complexity, and thats the issue. because now there are people essentially denying that the feather would drop slower, because they're so fixated on the idea of gravity accelerating all things equally, when instead they should recognize the distinction. what led me to make this post was exactly that—people weren't even recognizing the distinction i had found, thus further making me question whether the book was actually just incorrect or if I was simply wrong >

Imagine you have a shopping list. You MUST buy the 2 items on your list and you must buy them today in order to meet an important deadline.  
One item is office paper. There are two stores in town that sell it: 
Store A is across the street - sells for $50.
Store B is 10 minute drive - sells for $40.  
The second item is a new heavy duty office printer/scanner. There are again two stores that sell it:
Store X is also across the street - sells for $5000.
Store Y is 10 minute drive - sells for $4990.  
Assuming the 10 minute drive cost of gas is negligible (maybe a buck), wouldn't it make equal sense to drive both distances to save the $?  
This is what the textbook example was describing. Any variance in this scenario changes the best course of action entirely. I.e. if there is no urgency to making the purchase, if the purchase is not really necessary, etc. >

Lazily, I'm going to award the !delta here even though others have also brought this up, just as a reference for anyone else who may be interested.
Basically, as you say, the economics textbook provided a scenario with very restricted/specific conditions, and then used that to demonstrate its point that relative change in value doesn't matter, but rather absolute/total change. The broader point of total cost vs benefit actually maps onto my scenarios: 49$ off a 50$ hat absolutely obliterates most of the total cost, whereas 49$ off a 50,000$ tractor barely dents it. Thus, in the latter situation, most of the cost in the tractor is retained, and thus it makes logical sense to not be that compelled by this change in value. HOWEVER, at a superficial level, one can still say that 49$ was saved in either case.
So I still disagree that acting to save 49$ on the hat necessitates that I also act to save 49$ on the tractor (to be logically consistent), because that requirement only makes sense if the restricted/specific conditions of the hypothetical are maintained as well. It seems clear to see that the underlying principle of 'acting to save x' does not necessarily maintain when the conditions are different. >

I think something implicit here that needs to be mentioned outright is that $1 for that $50 hat is probably the best deal you'll ever see on that hat. So it makes sense to jump on the deal. 
Versus the tractor being $49 off? If it's not urgent, you might as well wait and see if a better deal comes. There's a possibility you'll save a lot more by waiting. 
That's why the conditions matter so much. $49 isn't the same $49 anymore if in one case it's an unheard of deal and in the other case it might get better. That's why we need restrictions for the textbook example to work. If we somehow knew that the tractor would never go on sale again, then it should be worth just as much to snatch that $49 deal as with the hat.
In the gum analogy, it totally depends on how badly you need that gum. Say you're on your way to a first date and you realize your breath stinks and there's no time to go home and brush your teeth. That gum is your only hope at not ruining the date? Then yeah I'd pay $10.50 for it. But if there's no rush and you can wait for a better deal somewhere else? It would be rational to wait. 
In the end, it's about getting the best deals and ending up with the most total value. That value includes the restrictions on when you need things. >

Not OP, but this is a great point. Time constrained deals matter! >

You're acting as if the total percentage of the cost is relevant. Why though? Either way you'd have $49 more in your bank account than you would have otherwise. And that $49 will spend just as well.
You're falling into the fallacy. "The price has hardly changed." But that's not what actually matters, what actually matters is the dollar amount. Saving 99% vs 1% doesn't matter because you don't spend percentage points, you spend dollars >

this entails the absurdity of you either A) not picking up the hat for 1$, or B) you jumping on the opportunity to save 49$ off a 50,000$ tractor. neither of which make sense to me. >

Just because it's absurd doesn't mean that it's not rational, it just means that humans are so irrational that rationality feels intuitively absurd. >

in this case absurd is meant to represent an irrational conclusion >

Yeah but it doesn't, you just keep insisting that people would obviously make the different choices, but you don't engage with what exactly makes that rational, if not a material benefit. >

okay, so is it irrational to not want to buy 50c gum for 10$ if you would otherwise pay 10$ more for your 50,000$ tractor, assuming in both cases you showed up to the store to buy them? >

Let's say there are two stores (and you only have time/gas to go to one of them). You need a 50k tractor and 10c gum.
One sells the 50k tractor for 49000, but in order to get that deal, you need to buy the 10c gum at $100.
The other sells the 50k tractor for 50k and the 10c gum for 10c.
Which one do you go to? >

the former >

okay. Let's change it to 50k tractor for 49900.10 and 10c gum for 100. Would it matter which store you went to? >

dont think so >

You're really cherry-picking your scenario.
What if I do need the tractor urgently, and it's not going to cost most more than $49 to buy it from the seller that has it for less?
What if we replace $49 with $1,000 and replace "a hat" with a 75" 4k OLED TV?
I could get the TV practically for free (say 99% off), but I'm perfectly happy with my TV and don't want to deal with the hassle of getting a new one and setting it up.  Conversely, my tractor is costing an arm and a leg in repairs as it ages, and new ones never go on sale.  I'd be a fool not to take advantage of a rare sale and get something that will help me perform my job for years to come.
Point being: it can be rational to jump.  It can be rational not to jump.  There's more than just percentages to look at. >

Ago to op profile 
His last 4 cmv all come across with this same bulkshit 
He gets his viewed disproven but decides to flail about grasping for straws and refusing to ultimately define the things he wants go debate >

That doesn't sound like the economics books I used, but I don't have them on hand, so who knows, maybe I'm irrational and forgetful to boot. 
The books I do remember also touched on opportunity cost, on the fact that not all actors are rational, and that different different actors value a given product differently depending on both rational and irrational factors. 
An example like the one you shared would be used to support the fact that consumers are not always acting rationally, that "big number more good," is a real phenomenon. It sort of depends on what level of class you are taking. Are we talking about theoretical economic systems or are we talking about consumer psychology? 
If it's just a claim that "sometimes it's rational to not spend 50k" then I agree with you. That seems like a trivially obvious statement. 
If it's a claim that "All else being equal, if $100 and 50k have the same relative value to you, and we can assume no hidden factors or detriments to either, and you would prefer to save X net value on one but not the other, then you are irrational," then, well, the textbook is correct. 
Later chapters should show, though, that for most people there is quite a large difference in $100 and $50k, and that very rarely is "all else equal." Gotta start with the models though, from the general to the specific. >


If it's just a claim that "sometimes it's rational to not spend 50k" then I agree with you. That seems like a trivially obvious statement.

yes, i think thats on track with where im going

If it's a claim that "All else being equal, if $100 and 50k have the same relative value to you, and we can assume no hidden factors or detriments to either, and you would prefer to save X net value on one but not the other, then you are irrational," then, well, the textbook is correct.

well the value assessment is itself a consideration here, so exactly. if we isolate only this ONE consideration and ignore everything else, then it makes sense at a theoretical level, but the implication is as i described in my example, where taking into consideration change in relative value is apparently irrational, period. it seems as though I agree with the theoretically restricted version, but not the more nuanced, realistic perspective that does involve pondering the change in value.
people jump to saying 'book example says u will buy it,' which is why i used the hat example without urgency, but this is much more obvious if you say something like "would you buy the 50,000$ tractor still if it suddenly raised by 10$? if so, then you must also buy the 50 cent gum that raises 10$ too. otherwise, you have to quibble over the 10$ on your tractor." >

But theres tons of differences between why you'd buy a specific tractor and why you'd buy a specific pack of gum 
If there were tons of shops in the area selling tractors for $10 cheaper and it didn't matter which one I bought, then yes I'd obviously buy the cheaper tractor 
If the $10.50 gum was something I needed to make a living and I had to travel for hours to get to the next gum store then yes I'd buy the more expensive gum >

Right, exactly, that's why it's a very bad example. >

This is textbook example of irrational economical choice because while intuitively you think relative price change, economically speaking $50 is $50 no matter how you earn/save/gain it. >

can you respond to the gum analogy then plz >

What gum analogy? It's not in your post that I replied. >

so you go to the store to buy a tractor for 50k and suddenly its 10$ more. do you buy it?
now u go to store to buy a 50c gum and its suddenly 10$ more. do you buy it? >

Is there an other store that still sells the product with old prices? If not I really don't have a choice other than to pay the higher cost.
But this analogy is flawed in other significant way. Tractor is a durable good meaning you will use it for decades. So the cost increase is only a buck per year. But gum is consumable that you will use for hour or so. Now the price increase in a year is huge. >


If not I really don't have a choice other than to pay the higher cost.

you could...choose to not buy it?
the point is that there are distinctions and it's not a universal principle >

Did you read my second paragraph?
And original example was "would you travel to save 10" meaning there is option to pay more. >

The key difference between the book example and your variant is the chances of weirdness.  If I go to buy a hat and it's $1 instead of $50, that probably won't last.  The fact that it's a large percentage change means that it's unlikely that the hat can be made profitably for $1 and so I can assume that if I return in a week it'll be above $1.  Whereas the fact that the tractor is a small percent decrease means they are still making money at the lower price.  Maybe it'll be even cheaper in another week.
Similarly maybe a week from now I won't need a hat or a tractor.  Let's call that 5% chance.  So if I am saving 95% off the cost, that 5% chance is ok.  But if I don't need that tractor after all and I'm only saving 0.1% that is an important consideration.
So "rush out now vs wait til I need it", the percent savings matter.
But these factors don't apply if I'm buying right now and it just depends how far I'm driving.  So the percent savings doesnt have the same relevance in that situation. >

You're considering potential, not actual savings. The potential to save more in a sale that could possibly happen in the future is greater on the tractor. 
Discounting any future sale, you will be money ahead to make the purchase now. Within the constraints of the situation posed, the sales are actually equal. 
It is actually irrational to expect something more when nothing more is promised. >

So in example 1, you jump up and go to the store to buy an item you need for 49$ cheaper.
Then, in example 2, you jump up and go to the store to buy an item you need for 49$ cheaper. 
Using the usual assumptions foe these examples (these are the best possible prices and you cannot negotiate) then yes they are exactly the same. >

The key there is that you are 'thinking' of buying a tractor. A 98% discount in a hat is enough to push you over your hesitance, but a .1% on the tractor isn't. Is not about the 5 minute drive.
You would definitely buy the tractor in a dealership that is 5 min further if the tractor is 50$ cheaper, and you are already out to buy a tractor. >

i agree with this. my point is that the principle doesn't carry over >

Well, I don't know what principle you refer to, as I would not drive 1h to save 10$ on a phone, or in anything (unless I intend on buying many units, but then it's no longer 10$). >

if we remove all of the extra information to simply get to the end result/benefit, it looks like this:
scenario 1: you save $49
scenario 2: you save $49 
it's the same thing >

You are completely ignoring the point in the first example from economist text books by making it a 5 minute drive. You're basically making the time/travel cost irrelevant. 
Let's say you make 20 bucks an hour, if you drive an hour to save 10 bucks you're at a net negative especially after you factor in gas and wear on the car. It doesn't matter if the item was free and normally 10 bucks or if the item was 500,000 bucks and is now 499,990 dollars you're still losing money by getting the sale. 
Assuming that the time/travel is free the reason jumping on a hat that's 1 dollar instead of 50 makes sense and jumping on a tractor that is 49,951 instead of 50,000 doesn't is because a better sale is likely to occur on the tractor, if for some reason you knew for a fact that the tractor would never be cheaper then it would make just as much sense to run out and buy it than it would the hat.
Conversely if an item is 50% off regularly there's no reason to rush out and buy it, a lot of gamers suffer from sale fatigue when looking at steam sales for example, they notice the game they want being repeatedly on sale for 20-80% so they have reason to believe it'll be on sale again in the near future perhaps even a better sale and if they have a backlog they are not likely to buy it even if the sale is good for the sole reason they know it'll be on sale again. It's more about the rarity of the deal than it is how good the deal is by %. >

The main thing that confounds these decisions is opportunity cost. I suppose it's also emotionally compelling, but that's not a good rational reason to decide, unlike these:

What were you otherwise going to do with that 10 minutes?
What were you otherwise going to do with that $50,000? 
Cost of depreciation of buying the item now rather than later. 

In the first case, $10 might be a good deal either way... or not. It is a much smaller fraction of the time investment it will take to buy and take ownership of the tractor. 
In the second case: you can make $125 in a month even just having your $50,000 for a tractor in a 3% APY savings account. You can't do that with the money for a $50 hat. >

There needs to be assumptions or more information given before you can determine if this is rational.
Also, it seems you're confusing how easy something is to rationalize and something being rational. >

Consider the time value of money.
In the phone example, you've decided that one hour of your time is worth $10.
In the TV example, you're saying that one hour of your time is worth more than ten dollars.
How much is your time worth? If it's 10/hr, then why not save $10 on the TV? If it's more than 10/hr, why come out at a "loss" on the phone? You're saying that the same amount of your time is not worth the same amount of money, which is irrational.
Using your examples, you're saying that your time is worth an effective hourly rate of 588/hr (saving $49 for five minutes of work) in some cases but not in others. You're behaving differently in the face of the same overall outcome, which is irrational. >


You're planning on getting it, but there's no urgency.

The key here isn't your willingness to drive 5 minutes for 50$, it's your expectation that it could be discounted further. The only reason not to save $50 on a $50K purchase for 5 minutes of driving is if you think you could save more by waiting.
The hat will never be on a better sale than $49 off the $50 tag. That's the cheapest you could possibly get it, and it makes sense to pounce on that deal and save $49. If you don't immediately pounce on that same deal for the tractor, then you're either waiting for a better deal or you're failing to conceptualize that money as already spent despite having already decided to buy the tractor, because in the case where you don't expect future discounts, these scenarios are the same. You have already allocated the funds to these purchases by deciding to get them at full price, any sale is a savings on that money. >

If you have the $50k sitting in your pocket and could just throw the tractor in the back seat and ride home with it, then sure, it would make sense to go grab it when it's a little cheaper.
The reason is hard to imagine jumping on the tractor deal is because buying a tractor is a much longer and harder process compared to buying a hat. You need to carefully budget it out, make sure that the tractor is exactly what you're looking for, there's no problems with it, get the right gas to use, arrange for transportation, find somewhere to store it, etc.
You could make it closer by using a luxury hat that costs $15k as your example instead, but that would still have a different context because if you're the kind of person who can afford to spend $15k on a hat, then you're probably wealthy enough that $50 isn't worth much to you. But then the $50 hat being on sale for $1 is also not worth it for you, so it's still not a matter of percentages but absolute worth.
Basically, the example in the book is good, but you're trying to apply it too strictly to situations where other factors come into play. >


I think it’s an appropriate assessment of the change in value, and the degree to which the value of the item changes is meaningful

The point is would you drive across town for x amount, and showing that the context will make you feel different about the exact same thing for the same amount. Its a hypothetical that’s designed to isolate those two choices: buy it here for $x or drive   across town for a better price.  Theres no better deal coming, prices don’t fluctuate, nothing but those two options.
A rational person would choose the option which gave to them had the highest value over the one that made them feel like they got a meaningful deal. Maybe thet think the drive isn’t worth it, maybe it is, but it would be the dame answer in both cases.
Of course IRL theres a lot more factors, like a 99% sale is rare and you should jump on it immediately, a 1% sale means you may aswell wait for a better price if it’s not urgent . But thats not the point of the experiment, its just a hypothetical example to show people are irrational. >

You (and everyone else in this thread) are looking at this from the book's perspective and not real life.  You basically can't (and normal people would never) look at these two purchases to judge real-life comparative purchases.  And if the book considers it irrational, then people should not be reading that book.
The reason?  It is because most people (sans the uber rich) would use other factors to decide in addition to it just being a percentage of savings or a simple cash delta.
If you are buying something relatively inexpensive, or something that's seen as a commodity, price weighs very heavily into the decision.
If you are buying something very expensive and is going to be used to support some kind of income for you (like a $50K tractor), it isn't all about money in the purchase price.  Which dealer would provide better service? Which has a better reputation? Etc., etc.....
TLDR:  It isn't a two dimensional thing. >

"Change in value" is wrong; this is about a change in cost. Value is up to you: what's the benefit to you to have these items? I don't know.
If you have decided (not merely want) to buy both these items, then saving $49 is the same in both cases, so it's irrational to consider one more compelling than the other. They're the same deal, so buy both now. 
If not, then the hat is more compelling based on the almost zero risk associated with spending $1... unless you have so little wealth that that's expensive for you or you have enough wealth that $50k is equally meaningless to you.
Finally, if you don't really want the hat, then even $1 is a waste of money. Not much of one, generally speaking, but strictly speaking a waste of money. >

I'm sure I'm late, but I'll take a crack at it anyway.  Deciding where to buy something based on price, when to buy something based on price, and deciding whether to buy something at all are completely different calculations.  When you say "but there is no urgency" you are deciding when to buy something.  In the example you gave from the text book the decision whether and when to buy was already made (yes buying and buying today), the only remaining decision was "where" based on price.
The point the book was trying to make might be slightly more clear by tweaking the example.  Let's say you went into a store and bought a tractor for $50,000 and a cell phone for $100.  After you leave the store they call you asking if you will take part in a survey regarding your phone purchase that will take an hour and pay $10.  You can decide yes or no... But would your answer change based on if they said the survey was for the tractor purchase?  If you are acting rationally your answer would be the same in both cases.  The car drive in the original problem is no different.  The only decision is what is your time worth. >

If you drive 1 hour to save $10, you're an idiot, lol. That's at least $15 worth of gas. 
Yeah our little monke brains think that $49 off a car is no big deal because it's a small percentage, but $49 is $49 no matter where you're saving it. >

$ goes in front of the number. >

Not in all countries I assume? >

in addition to what others have said, this is probably against the rules. you don’t actually want your view changed, you just want to flex on chapter 1 of a book nobody read when you should be asking your teacher about it >


The book example assumes you are going to buy the products anyway. If you are willing to drive 1 hour to save $10 on the $100 item, you should also be willing to drive 1 hour to save $10 on the $2000 item. But again, this assumes you are going to buy the items anyway.

my example also entails you will buy them anyways, but that it isn't urgent. >

The issue at hand in either case is 49$. That is your profit in either case. Do you agree? >

at a simplistic level obviously >

You make cheap investments more often so saving money on them can be more meaningful >

can you elaborate? >

You buy a 50k thing once a few years. You buy 50$ things pretty often so when you can get it cheaper you'll take that discount >

Suppose you're going to a store that has both the hat and the tractor. Only, now the tractor is $49,901 -- on sale for $99 off. You need to buy both. Additionally, you can only choose to take one of these two deals. You can either have a hat for 98% off or a tractor for about 0.2% off. Which deal do you take? >

so in either case im saving 99$? >

No, the hat is still $49 off. >

How much other shit have you got to get done today? I find myself paying for convenience more and more as my life gets more hectic. >

well yeah, i can get behind the idea that people act based on emotions rather than logic. im purely going at it from an unrealistic 'if someone were purely logic' perspective >

tbh in a real life situation, I'd get the hat, because it's unlikely to be reduced to less than $1. the tractor is reduced by a comparatively small amount, so I'd wait, since there is a much higher reduction possibility. >

If you could buy multiple hats at $1 and resell them at FMV (let’s say $20 each in bulk), would you?  If not you, some arbitrager would.  And I’m willing to bet hats are a lot more liquid than tractors (you could just undercut someone on Amazon).  If you did this for 100 hats you’d make a solid $1900!
Buying a tractor however is just different:  not as liquid, harder to physically move, the reasons you would buy it are different, etc
This is why your example makes alarms go off in people’s heads.  “This is such an odd example but I can’t put my finger on it…”
In reality it truly is a silly example used to argue a fallacious argument: one in which the dollar amount is the only factor in this purchase. >

Isn’t this just price elasticity of demand? >

This just needs more context. It's obviously nonsense to FOMO into a purchase you wouldn't otherwise do over a 0.1% discount, but you didn't need us to tell you that. What does make sense is to slightly change your schedule to get a 0.1% discount on something you were going to buy anyway. Like, why not do it? >

On paper your argument makes sense and it would be irrational to not jump at the savings regardless. However it ignores reality.
Generally speaking most people making a $50,000 purchase are doing something that's pretty significant to them, a lot of risk is involved and also going to be a ton of logistics involved in having it brought to wherever I need it. All of these things are going to weigh heavily and the small Savings of $49 isn't going to make me jump up and change my plans instead of going with the pace and plan I'm comfortable with. 
If I'm buying a hat, and it's virtually free? Psh theres no risk, let's go. >

Okay change it such that you show up to buy 50c pack of gum at store, and situation B is showing up to buy 50k tractor at store. in both situations, price raises 10$. well, you were ready to make the purchase, no? its just 10$ in  both situations, ain't it? >

Well now you are talking about raising the price.  That's different than  lowering the price.
So suppose that you were at the store and ready to pay $10.50 for gum when someone tells you that it costs 50 cents at another store.  If you decide to travel 5-10 minutes to save the $10 then the same logic makes sense for the tractor.
I suppose another factor could be that if you learn that $10.50 is a ridiculous price for gum you might feel an urge to "punish" the store by not buying there.  Whereas a $10 discrepancy on the tractor means the price is not ridiculous.  This urge to punish might not be irrational if you want to discourage price gouging.  However, I think even there Thaler has this covered.  He explicitly mentions that the suggested retail price of the clock radio is higher than the sale price. >

How much do you value your free time though?
If it takes me an hour round trip to save any amount of money, the savings must make up for gas and the inconvenience of having to go and get it. >

Irrational doesn't mean "bad" or illogical. It just means that behaviour violates the assumptions of complete and transitive preferences that are used to construct economic models.
Of course people don't always behave in accordance with those assumptions. Because people are not rational. But we can sometimes use the assumption of rationality, even if it's a major simplification, to create useful predictions about how people will behave in the aggregate. >

I think those examples are clearly entirely about the monetary cost. They're not supposed to be analyzed as real world dilemmas, they're just a way for you to contextualize the concept to better understand it. 
The real answer is that the monetary cost is not the reason we buy most things, you're only irrational if your entire logical thought process is about the savings and the savings only. It doesn't take into account opportunity costs, or life costs, or even lifestyle costs of owning these items, of being able to purchase these items in the first place. I think it's mostly a misunderstanding. Econ books are there to teach you econ of course. >

Maybe this is worthy of a different post, but I’d suggest there is no such thing as irrational behaviour in economics and anyone who says otherwise should review the first lesson of their undergrad textbook titled “utility functions”. >

Im financing the tractor for the next 10 years.... the TV I am either putting on a credit card or paying cash... >

The issue here is that the chances of me needing a hat in the future are pretty high, and $1 is not a significant amount of money. The chances of me ever needing a tractor are incredibly low, and $49,951 is an enormous amount of money. Spending $1 on a hat I'll probably use is a much more reasonable expense than spending $49,951 on a tractor I'm almost guaranteed to never need. >

Being rich as fuck I wouldn't care about either of those sales.
My point is, context matters. >

Because your opportunity costs are different when evaluating higher prices. When you consider buying a tractor, you think whether to get it or get a truck (or whatever else $50k can get you). $50 has no real significant bearing on that decision.
If someone offered you the tractor for $50k, would you really be adamant about reducing the price by $50? Would the $50 help you get something else that is cool (like a dinner)? Sure, but that was never in your mind to begin with and you can live without it in this massive financial decision of yours.
Whereas with the hat, you perhaps were visualizing whether to keep the $50 (and perhaps get the dinner), or get the hat. Now all of a sudden, you can get the hat and the dinner, so it's a large win since you got to fulfill both at the top things in your head. >

Also 50,000 is a much bigger financial risk than 50 on a hat. As such the saving isn't enough incentive to take on all that risk. >

In the real world this example is subject to other factors. For example, you can’t know that the tractor for $50 less is exactly the same. The warrant might be backed by a less reputable seller. There is additional uncertainty which comes with the last minute one. In the real world, we don’t have perfect knowledge of everything in the market or the product itself. 
But ignoring all of that, you’re better off getting the cheaper tractor. >

In a vacuum yes, 50 bucks is 50 bucks.
However, we don't live in a textbook economics situation. We live in the real world, where just because this makes sense when you look at it without considering anything extra, you don't consider anything besides the things listed.
When you look at an ad for a 50 dollar discount tractor, it is very likely you can do better just by waiting or negotiating. However, for a hat, you're very unlikely to get a better deal.
In the context of budgets that you have set aside for certain expenditures, 50 dollars can be extremely much or extremely little. Spending 50 dollars extra on a plane ticket is very different from spending 50 dollars extra on your lunch, even if both are single expenditures. They're a very different 50 dollars to spend. >

If you buy the tractor on sale, you have money to also buy the hat that is on sale >

It depends why you haven't already bought the item in the first place. If you haven't because you are waiting for a better price then there is a much higher chance of a sale saving you more than $49 for the tractor than the hat. >

The key here is the urgency. It's not about the money saved, but how good the deal is. 0.1 percent off is a deal that is likely to be improved upon. 98 percent off is unheard of. So you rush to get a deal you may never see again, but may wait to see if that tractor was even more discounted. >

It's good business sense to value money even if it isn't an extreme amount. The principle or habit can outweight the feeling of a deal being better or worse than others by saving you money.
However since most people aren't strictly cold calculating machines, and can be offended if they don't percieve an offer to hold value - it's unlikely anyone would give it as an add. >

What attracts most people to discounts is the relative discount. Saving $49 (98% discount ) on a $50 hat is attractive, affordable, and worth it for the fun of buying a hat you like but may only wear a few times for $1 is fun. Most people don't value their time that much. Even at $30/hr a 1 hour drive makes a $1 hat worth it.
A tractor is something that some people need, unless you plan on using a hoe and a shovel. If you've plowed a acre field by hand once, you'll never want to do it again. A tractor is for plowing 10 acres. Plus you make money on the crops you produce and you can write it off as an expense. Saving $50 on a $50k vehicle is a 0.1% savings and immaterial. 
Personally, I naturally love saving money but I also value my free time at $50/hr.
A better example of what I think the book is trying to imply is, "How far would a person drive to save 20% on gas for a 20 gallon tank?" 
I'd  also guess the book is trying to demonstrate marginal utility. The more you make, the less the money is worth to you. Michael Jordan routinely make million dollar bets on the golf course because he has 1700 * million dollars in net worth. 
What people see as wealthy is relative to their peers. At the yacht club, a $1 million dollars net worth is on the poor side.
I used to have a 60 ft yacht and we would do charity events. People would ask what it cost, I'd ask them what they thought it cost.
$50k, $200k, $500k. the answers would vary. I'd just tell them, "Wow, what a Good Guess! You are one smart cookie.". 
The boat cost $1.5 million and  $100k a year in expenses. It would have been rude to tell them that. >

Why is putting any weight into the percentage rational?
If driving an hour to save $10 on a $100 purchase why would that driver become not worth it if the price went up
Either way it’s 1 hour to save $10
It seems like your whole based on your perception of the value of the savings, which sounds irrational to me >

I travelled 15 minutes to buy a 250 leer cap for my truck last week. I’m pretty sure I can sell it for  at least 650 though. Not relevant but I’m drinking >

I do t think it’s irrational; I agree with you. The difference is, people aren’t so much measuring money directly, but their feelings going through the effort of getting that much money. If it takes you 5 months to save up for a $5,000 tractor, then 5 months into saving up, you’re not going to remember nor care if you happened to work $5 worth of overtime or not one day 4 months ago.
But if we’re talking about a $6 hat that could be $5 off, well, if I were offered to go home an hour early but receive the same pay, I’d probably be pretty happy right then even if I wouldn’t even necessarily remember it in 5 month
When I judge the price of something, I personally imagine the effort that goes into earning the money for it. And just as humans can’t tell if there’s 5,000 or 4,995 balloons in a group or not (but can easily discern between 6 and 1 balloons), I don’t care two wits whether I work an hour less over the course of the next 5 months to afford a tractor or not, but if I can work for 10 minutes for a hat vs a whole hour, I’d much prefer the 10 minute period >

One major thing I haven't seen mentioned, is the concept of value existing beyond simply monetary. This boils down to "rational" in economics not meaning the same thing as "rational" in common speech. In economics, it's a term for segregating the value of money from other value sources. But in common usage, "it feels good" is literally a rationale that can be used to declare something as a rational behavior. Rationalizing in economics means to logically justify an action independent of nonmonetary value (such as emotion), in order to see a clearer image of the monetary decisions made. But humans rationalize everything. Every action we take is rationalized, and very rarely are the rationales "coldly logical". 
In other words, it's a vocabulary problem. In economics terms, buying the hat but not the tractor is irrational. In common terms, "the deal on the hat feels good and makes me feel clever" is sufficient rationale for the different action to be considered "rational".