The Pain of Paying: The Psychology of Money

The Pain of Paying: The Psychology of Money

Have a question for Dan? You can submit a question in advance of his live session on February 13 to During that live session, you may tweet questions for Professor Ariely using the #fuquaalumni hashtag.


The Pain of Paying: The Psychology of Money

Dan Ariely, James B. Duke Professor of Psychology & Behavioral Economics

During this session, you will learn:
– why paying with cash for a nice dinner feels worse than paying with a credit card
– how AOL underestimated internet usage with a change in pricing structure
– how to get maximum enjoyment from your vacation


February 1, 2013 / 14 Comments / by / in
  • Thank you~Love Dan Ariely

  • great discussion

  • I really great talk. Shared it on: Storyteller's Shopping Basket

  • Reduce the pain of pain

  • thanks Dan and DUKE

  • Only idiots that do not understand the nature of money feel pain of paying. By the way, if my wife buys me something that I didn't buy in the first place (hat example) I would feel the same pain. (I'm an idiot)

  • Curious about the 'clock' that Dan describes in the AOL example. Was this an actual clock that AOL users could see ticking over, or was it just their own consciousness that they were paying for a certain amount of time? If it was a visible clock (or meter), does that suggest AOL would have been better off keeping time metered but removing the clock (or modifying it, so that instead of constantly reminding the customer of how much they had used up, it might only 'warn' the customer that time is expiring once they get close to the 20 hours). Financially, for AOL, the best outcome was not to stop metering time, but to somehow get people to pay for more time!

  • Do you think a way to decrease the pain of paying is by changing your thinking about the money? Isn't just the pain of paying a matter of perception?

  • I agree with psychological phenomenon Dan is explaining. This is definitely how people act in reality. I could see it on myself, people around me… It is definitely useful for marketing departments to adjust their policies. As Dan is elaborating people might apply different paying types for different needs based on whether they want to enjoy or feel the costs.

    Here I also see another way; let’s call it rational, of approaching this phenomenon from one's perspective. Transactions with money are only intermediary actions in between. Bottom line is elsewhere – on one hand there is need, on the other there is satisfaction. Money is universal metric for setting value.

    What I consider as rational is to abstract from different types of paying generating different feelings. If it is 10$, it does not matter whether it is in cash or by card, upfront or at the moment of particular event (I do not mean to deny time value of money here) , just face it rationally. That is what I find rational; I personally go for and in what I train myself.

  • great lectures

  • this guy is asking the right questions

  • For me the card would actually feel worse, because the cash doesn't show up in my account so I don't count cash in the total amount of money I have, so for me cash makes it feel free whereas with my card I can actually see it coming out of my account and the money I htought I had I no longer have and for some reason that gets me emotionally.

  • Inspiring Video , specially the part of the perfect gift !

  • This really strikes a chord. Dan is too good! The concepts are explained in such an entertaining and simple way! Though I would like to know how the 'irrational' behavior in case of AOL could be captured in making an accurate prediction.

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