Are we really rational?

Yesterday morning I walked around Chestnut street off the Marina looking for a barber. My locks had grown unwieldy refused to remain in place. Like all true Indians I had tried applying coconut oil, but of course I now ended up looking like "gangu teli" instead of the brown James Dean I had always envisioned myself to be! My wife refused to put up with my smelly mop and pushed me off to get my head shorn.



So I decided to shop around a bit - being a true brown Indian I needed a bargain - no walking into the first salon i saw - and I am glad I did not. For the first one I saw said "$40 for scissors and razor cut". Like hair was cut with something also, apart from scissors? I would rather spend $40 on a nice bottle of wine or a few mugs of beer or some delicious food or better some books - but for getting my hair cut by a half man - no way!!! $40 for 15 mins of work - that's $160 an hour - close to a fresh associate's billing rate in a medium size law or consulting firm. Do people care so much about getting their mane organized? And yet people will pay. We all know Wily Billy got a $400 hair cut while in office! Good for the economy - any exchange of this sort causes GDP to increase!

I ended up paying $ 15 eventually. My Indian thirst for a bargain was quenched somewhat, but I could not get the lady on the other side to give me a discount. All that i had learnt in negotation class about BATNA and MESOs was of no use. I was reminded of comedian Russell Peters's joke about Indians and Chinese - The Indians always want a bargain - and the Chinese will never give you a bargain!

But is paying $40 of $400 for a haircut rational behaviour in a true economic sense? Why would a human pay 10 times more for a service, where the end effects are the same? My hair at the end of a $15 hair cut looks exactly the same as at the end of a $40 haircut as the end of $400 haircut. So what's rational here? Nothing - except that some misperceived sense of satisfaction that causes people to be willing to pay more even though the outcomes are the same at the end of the experience.

All this made me think of another experience where I believe awe are truly not rational - tipping. The tips that people leave are not driven by the nature of the service itself or the quality of the service in most cases - but by the value of the bill of the primary service offered. So if we drank the exactly same orange juice at a restaurant that charges $5 for a glass versus anotherthat charges $3 for a glass - we would end up paying a higher tip in the former instance. Even though there' no difference in the quality of service or the orange juice in itself. So which is rational behavour - to value the same service differently depending on different environs or to value it constantly based on the nature of the service?