Called an historic shift, MGM Resorts said it would charge up to $10 to park at its Las Vegas Strip properties. The reason (they said) was a $54 million expense for 3,000 new parking spaces and an additional $26 million to improve the parking experience. Apparently indifferent to “why,” their customers were angry that they no longer had free parking.
Where are we going? To why we love free.
The Power of Free
Behavioral economist Daniel Ariely tells us that free so excites us that we ignore its cost.
In Dr. Ariely’s lab, asked to choose between a fancy Lindt chocolate for 15 cents and a Hershey Kiss for one cent, most people chose the fancy alternative, the Lindt. But when the price of the Lindt sunk to 14 cents and the Hershey became free, a majority of the study’s participants took the Hershey. Yes, the 14 cents difference was a constant but “free” was too good to refuse.
Years ago, when Amazon offered people in France the opportunity to pay one franc (close to 20 cents) for shipping if they bought two books instead of one, there was a negligible sales pop. But after the 20 cents was replaced by “free,” revenue soared.
The siren song of free lured me at a gift card store. About to pay, I was told that by purchasing just one more card, I would get one free. So I returned to the racks and wasted more than 10 minutes selecting cards I neither needed nor wanted.
Our Bottom Line: Loss Aversion
Economics Nobel Laureate, Daniel Kahneman might have provided the explanation for our love of free when he explored loss aversion in Thinking Fast and Slow. More than the pleasure of gain, we appear to be wired to avoid loss. Because free involves no obvious loss, we love it.
But my greeting card experience demonstrated how much I paid with my extra time. As for MGM, economist Donald Shoup has told us that there is no such thing as free parking, Because of the time we waste when we search for a free spot and the money the free spot lets us spend in the casino, that free parking becomes rather expensive. In fact, MGM’s Las Vegas Strip hotels might be saving us money when they eliminate free parking.