Thursday, July 09, 2009

"Cognitive cost" of spending...anything, even micro payments

Anderson borrows a term from George Washington economist Nick Szabo, labeling this flag the “mental transaction cost.” Laziness has made us all want to avoid making any decision, no matter how inconsequential. Even if something is financially affordable, once we begin to question if it’s “worth it,” we’ve already spent cognitive energy considering the decision, and will most likely choose not to spend the money, even if it’s just a penny. Anderson says micropayments “are destined to fail, Szabo concluded, because although they minimize the economic costs of choices, they still have all the cognitive costs…many potential customers would be put off by the payment and decision process.”

From Jessica Roy's review of Free for the Nieman Journalism Lab.

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