To be rational or not ..

that is not the question…

But will behaviour allow it ….that is the question..

Find out through this set of simple everyday situation..

1. My friend has always wondered about the rationale behind fashion shows.
For one, the clothes and accessories are often not functional. For another,
they are frightfully expensive. Logically then, these shows ought to be a
waste of time, as few buy such expensive products. So, why then do
designers spend so much money on such shows?
2. Why do bars have dim lights, loud and fast music ?
3. Why is the charge for water high but negligible for small eats (at times
free) in bars?
4. What is the rationale behind food coupons in food courts where we pay a
round sum in the beginning and get a smart card and then the balance is
refunded?
5. Is there a difference between your approach to a loss of gain and your
approach to a loss?
6. What drive bargain sales?
7. What is Veblen goods?
8. If you had a choice between giving a gift and a memorable evening out on
your parents wedding anniversary which will you choose? Why?
9. Partition Pricing vs all inclusive pricing? What does this mean?
10. Consider this. People come to your house and ask for some donation to a
charity. You decide to donate Rs 500. They, however, insist that you
should pay a minimum of Rs 1,000! You refuse. They politely turn down
your money and leave. Is their decision rational?
11. Consider this. You go to a restaurant with your family. In a mood to try
something different, you order an exotic dish that unfortunately turns out
tasteless. Will you waste the food? If you behave like a typical person,
chances are you will box it and take it home. Why?
12. My friend recently bid for an auction on eBay. There were two different
auctions for the same product, a commemorative coin. But the one that
had a lower initial price attracted higher bids and eventually sold for more.
Why?
13. You are offered LINDT chocklates but with a condition. You would get only
one if you ate the chocklate immediately. But you could have another one
if you waited for 2 days without eating the first one. What would you do?
14. Why do people spend more with credit cards?
15. One of my friends recently had an opportunity to buy an exquisite name-
brand business suit at a 30 per cent discount. But he passed over the offer
because he figured that the discount price reflected inferior quality. You
 and I may, perhaps, react in the same manner. And yet we always scout
for discount buys. Why do we behave so differently to product prices?
16. All of us frequent restaurants. But have you ever wondered why
restaurants have dim lights? Behavioural economics can throw some light
on the subject! How?
17. Consider this. You walk into a local store and buy groceries. When you
dish out your credit card, the counter clerk tells you that will receive a 2
per cent discount if you pay cash. Would you? If you are a typical
consumer, you will still use your credit card. Why?
18. My friend’s friend has a problem — workers in his small factory are
threatening to go on strike due to disagreement on salary hike. A strike
would be lose-lose situation, as the firm will lose revenue during the strike
period and workers will not get their salary, leave alone the hike. So, why
then were the workers threatening to strike?
19. That A. R. Rahman won two Oscar awards is truly commendable. Some
have called him the “greatest ever” musician that India has produced. The
response is typical. Dhoni was called the “greatest ever” Indian captain
after his team beat Australia in the home series. Why do we so generously
assign the “greatest ever” label to people after they achieve a
commendable feat?
Fashion Shows

Suppose a fashion show introduces a designer handbag for Rs 30,000 — a price

that will leave many shocked. It is not that the designer expects many to buy the
product. But the fact is that the handbag is likely to have an indelible impression
on you. You, therefore, want to gift the handbag to your spouse but are torn
between affection and price. What do you do?

Shifting frame of reference

You settle for the next best handbag from the designer stable. And that may be
priced at Rs 15,000. Now, that is also an awful lot of money for a handbag. But
you reason that it is not as expensive as the Rs 30,000 bag. And that is precisely
what the designer wants!

That is why fashion shows are economically meaningful for the designers. It is
not about the less-functional more-expensive clothes that super models show-off
on the stage. Rather, it is about shifting your frame of reference.

Think about it. If you were shopping for a handbag for your spouse, chances you
would settle between Rs 3,000 and Rs 5,000. The fashion show most likely
shifted your reference value to Rs 30,000. You, therefore, settled for a bag for Rs
15,000.

Decoy pricing

Behavioural psychologists call this decoy pricing. We fall for this strategy all the
time — in the department store when we buy our monthly groceries and with car
dealers, when we buy a new or a pre-owned car.

There is, of course, a difference with monthly groceries and designer clothes and
accessories. The latter boasts of exclusivity; for not many will fall for Rs 15,000
handbag. And that is what makes you justify the price for the product.

Bars and Music

Christmas and New Year are two occasions when bars generate high traffic.
Behavioural economics has argued that the environment can influence the
consumption patterns of people shopping in department stores. Do loud music
and dim lights in bars have similar effect on people?

Suppose you visit a bar with your friends. You want to dance for a while and then
sit in a cozy corner to chat with your friends. The blasting music, however, acts
as a spoil sport to your social interaction.
You and your friends, hence, decide to order some drinks. Amidst the loud
music, your group silently sips the drink and occasionally converses. And as time
passes by, the group's consumption of alcohol only goes up. And all because the
music was loud!

Music and drinking

So, do bars deliberately play loud music to induce you to drink more? A study
was conducted in a bar in France where the level of music was randomly
increased to see if music had an impact on alcohol consumption.

And sure enough, the study found that people downed beers quicker as the
decibel levels went up.

The study attributed two reasons for the increase in beer consumption. One, the
loud music prevented social interaction, forcing people to drink instead. And, two,
loud music led to greater level of arousal among party-goers, prompting them to
drink more.

Small eats for free

Another study has shown that fast music leads to fast drinking! We already know
that dim lights in restaurants prompts patrons to eat more. Small wonder then
that bars have dim lights and loud, fast music.

Clearly, bar owners understand their economics well. Here is another example.
Bars charge you a princely sum to serve bottled water, yet often provide small
eats for free. Why?

Small-eats such as potato wafers and roasted nuts induce you to drink more.
Water, on the other hand, fills your bladder, preventing you from drinking alcohol.

So, bars would rather give you small-eats than water. And then present you with
a fat bill.

Food Coupons

The food court sells coupons in multiples of Rs 100. Suppose you buy coupons
for Rs 200. You then redeem the coupons at a certain food stall to buy burgers
and cola.

Assume that the total amount comes to Rs 160. You can surrender the balance
coupon amount and collect Rs40. Or you can simply exhaust the amount at the
food court. Which would you do?

Cost-benefit analysis
If you behave like a typical person, you would prefer to exhaust Rs 40. Why?
Spending is all about cost-benefit analysis. Or put in another way, it is about pain
of paying versus the pleasure of consuming the product purchased.

You already experienced the pain of spending when you bought Rs 200 worth of
coupons. Exhausting the balance of Rs 40 does not cause additional pain. You
may, therefore, indulge, as your self-control on eating greasy food leaves a lot to
be desired. Besides, cashing-in Rs 40 is not exciting enough.

Coupon system

Your decision is beneficial to the mall. Think about this. If the mall had a normal
system of allowing cash payment at each store, you may be very conscious of
how much you are spending and, perhaps, even what you are eating. The
coupon system, however, made you spend more.

The payment design essentially contains two elements that change our choice
patterns — the upfront payment and the payment that is not directly related to
any particular product. This, perhaps, disturbs the direct linkage between pain
and pleasure. And that, in turn, may be driving us to make spending decisions
not entirely logical to the rational mind.

Risk and losses

Consider this. Your friend is informed that he has lost his job because of the
company’s cost-cutting measures. What do think your friend would do? Hunt for
a similar job or do something radical? If his behaviour is typical, he would be…
radical. Why?

We draw comfort from doing things that we are familiar with. That is why most of
us keep the same employer, do the same job and, perhaps, take the same road
to the office every day. There is a strong (economic?) incentive for us to take
refuge in our comfort zone when we lose our job too.

Taking to entrepreneurship

But we do not do that. A recent study shows that we tend to get aggressive…
and radical. If your friend loses his job, he may well take to entrepreneurship —
something that he always desired but never came around to doing for the fear of
sacrificing his stable income.

This should not be entirely surprising. We behave this way with our investments.
Suppose you buy a stock for Rs 100. If it goes to Rs 150 in, say, one week,
chances are you will want to take profits. The reason? You do not want to lose
the unrealised gains.
Playing it safe

But what if the stock goes down to Rs 75? You typically carry the position, and
sometimes even buy more! If you are truly risk averse, you should sell the stock
and move into cash. But you do not. Why?

We take risks when we are in pain but play it safe when we are in realm of gains.
Two psychologists, Kahnemann and Tversky, who conducted experiments to test
if humans were, indeed, risk-averse found that we were instead loss averse.

It is this loss aversion effect that drives us to take risks when we are shaken out
of our comfort zone. Essentially, the change in circumstances breaks our habits
and promotes a change in our mindset. Perhaps, that is the change we need to
improve our standard of living

Bargain sales

One of the leading bookstores in the country is having its annual sale. The store
seems to have played well on consumer psychology. A sticker on each book,
often damaging the cover, shows how much you save by buying it at the
discounted price. This, I suspect, could increase store sales. Why?

Suppose a hardcover edition of a certain book costs Rs 1,250. You may not be
interested in buying it at that price. Weeks later, you find the same book at the
sale for Rs 280. The paperback edition still costs Rs 325. So, you quietly slip the
discounted book into the shopping cart. Why?

At discounted price

The sticker on the book shows the savings at the discounted price; the
paperback edition price only reaffirms the bargain buy. So, you buy it, even
though the book does not particularly interest you. We buy with our emotions first
and justify with some weird logic later.

You may rationalise that for the savings, the book could well be part of your large
library — a book that you will read when you are bored at home on a day it is
raining outside. For now, the shop has got its sale and the book, some corner
space in your library.

Anchoring bias

Behavioural psychologists may attribute your purchase decision to the anchoring

bias. This refers to a bias that drives us to take decisions based on some initial
reference point; in this case, your decision to buy was driven by the full price of
the book.
Neuroscientists would argue that the large savings sticker on the book cover
helped us dull the insula — the region in our brain that is activated when we
spend money. So, the pain of paying was not too much.

Whatever the rationale, we spend more if we believe that there is value buying.
That is why shops having discount sales are always crowded. It is also, perhaps,
the reason why people rush to buy stocks that are trading well below their 52-
week high.

VEBLEN GOODS

Suppose you buy a watch for Rs 3,000. It primarily satisfies the utility value
derived from a watch with basic aesthetics to boot. You certainly cannot flaunt
such a watch at a Saturday night party.

Value-expressive feature

But what if a watch means more to you than just its utility value? You would then
prefer to buy a watch that is eye-catching and expensive. A diamond-studded
Rolex, for instance.

Behavioural psychologists argue that your desire to pay several lakhs, if not
crores, to buy a diamond-studded watch is because of its value-expressive
features. This is the satisfaction derived from owning the product that goes
beyond the traditional utility value.

It is this value-expressive feature that drives the demand for such goods.
Classical economics shows us that change in price can have distinct effect on
demand; an increase in price typically pushes down demand for a product. The
reason is that you and I would either cut our consumption of that good or actively
look for cheaper substitutes. If coffee prices go up sharply, people may shift to
consuming tea, for instance.

Consumption pattern

But such a consumption pattern does not fit goods that are bought for their value-
expressive features. If price of a Rolex were to go up, demand could go up as
well! Why?

The increase in price could make the product more desirable as a status symbol.
That is, costlier the product, more the status-conscious people would clamour for
the good. A decline in its price could, hence, make such goods less desirable.

Products that follow such price-demand relationship are called Veblen goods,
named after Thornstein Veblen who first documented this phenomenon in his
book The Theory of the Leisure Class.
Money and happiness

Two professors in the US coined the term “conceptual consumption” to refer to

the fact that we buy concepts, not just the physical goods.

Take the new car that was launched last week. You may have bought it as a
mode of transport. Or, perhaps, more as a status symbol — a concept. It is the
same reason why people buy a Rolex and not just another cheap watch.

Enduring happiness

Economists may be right about these physical objects not getting us enduring
happiness. After a while, even the designer car that you bought becomes another
piece of steel transporting you across the city.

But that cannot be said of consuming memories. Suppose you take your friend
out for an exotic lunch or treat your spouse to a memorable evening. The
memory lingers on, for two reasons.

One, you can talk about it when you meet your friend the next time. Or you can
re-live the moments with your spouse. You cannot always do that with your
physical objects — even your prized car.

And, two, physical objects can be compared. Experiences cannot be. If your
neighbour buys a costlier vehicle, your car may not be a status symbol anymore.
Your neighbour’s exotic vacation at Aruba, however, does not make your
experience of having lunch with your friend or an evening with your spouse any
less memorable.

Indeed, behavioural economists argue that they could be linkages between

money and happiness.

Their research shows that we are happier when we donate to charity, spend on
our friends or loved ones.

Our happiness is, however, short-lived when we splurge on physical objects for
ourselves. Can we then say that money used for consuming memories buys us
happiness?

All inclusive Price vs Partition pricing

The cab drivers at the Bangalore airport charge an all-inclusive rate per kilometre
for ferrying you to the city. That is, you are not charged additionally for using the
air-conditioner (AC) in the car. This pricing system has affected their behaviour,
for most of them seem reluctant to switch on the AC. Why?
Consider the normal practice, called partition pricing. You pay a variable rate per
kilometre (km). If you use the AC, the variable rate is higher. Your conscious
decision to pay a higher fare forces the cab driver to switch on the AC.

In an all-inclusive fare, the cab driver gets the variable rate, whether a customer
uses the AC or not. The driver, hence, chooses not to switch on the AC, as that
saves costs and increases his profits.

But is an all-inclusive pricing optimal? Studies in behavioural economics show

that such pricing makes economic sense when the seller wants the customer to
focus on the core offering.

Framing bias

Suppose you are shopping for a home AC. The seller can offer an all-inclusive
price, which includes the stabiliser and the AC. Or he can offer a partition price,
where each product is priced separately.

If the stabiliser is just a normal brand, the seller might as well offer an all-
inclusive price. Why? Pricing the stabiliser separately catches our attention. We
may choose not to buy it if we believe we can get better quality elsewhere.

If the seller instead makes an all-inclusive offer, we may focus our attention on
the AC and just take the stabiliser that is given to us.

The difference in our behaviour, perhaps, has to do with the framing bias. Paying
separately for the stabiliser means we need to take another decision besides
buying the AC.

Our need to justify the pain of making another payment causes us to analyse the
product. And reject it often. Taking a decision for an all-inclusive product is less
difficult. Is that why the cab drivers adopt an all-inclusive price?

Rs 500/ or Rs 1000/-

The answer lies in the objective of the people collecting the donation. Suppose
they want to collect Rs 1,00,000. A minimum of Rs 1,000 from each person
would mean that they would have to seek no more than 100 people.

But why not collect the occasional Rs 500 from some donors? If the institution
accepts a donation of Rs 500, the likelihood of receiving Rs 1,000 from
subsequent donors comes down.

Social conformity
Think about this. When someone comes to you for a donation, you peer into the
donation book to see how much others have paid. And you pay more or less that
amount. Why?

The reason is that we are swayed by the collective decision of other people.
Behavioural psychologists call it social conformity. Solomon Asch, a social
psychologist, conducted experiments in this area. He found that in a group-
setting, an individual would suppress her own opinion and conform to the group
view, even if the group was wrong! Asch found that individuals felt the strong
need to fit into the group and not be ridiculed for carrying a different opinion. That
led them to conform to the group.

With donations, social conformity has to do with us not wanting to be ridiculed by

the society as being miserly. At the same time, we do not want to be extravagant,
lest the charity turns out to be a hoax. That is why we are swayed into paying Rs
1,000 when the minimum amount in the donation book is Rs 1,000. Turning down
a contribution of Rs 500 does not seem irrational in this context.

Food purchase

Studies in neuroeconomics have shown that two regions in our brain are
activated when we purchase goods. The nucleus accumbens, the brain’s reward
system, is turned on whenever you see a product that you desire.

The insula, on the other hand, is activated when you suffer from aversion, like
spending money.

You buy a product when the nucleus accumbens overwhelms the insula. But
when your purchase decision (ordering food) turns wrong, the insula gets
activated and increases your pain. To pacify the pain, you decide to take the food
home and “repair” it.

Dulling the pain

More often than not, you shove the food deep into your refrigerator and forget
about it. After a fortnight, when the fossilised food turns foul, you (often, your
spouse) decide it is time to bury it. So, what did you achieve by carting the food
home?

You, perhaps, never really wanted to “repair” the food. But the pain of wasting
was especially high when you paid for it. You, therefore, dull the activation in
your insula by taking the food home.

After a couple of days, the pain from the wasted food declines. Why? Because
the insula is busy getting excited with other wrong decisions you have taken
since then!
Fossilising the food and then dumping it is an ingenious way of dulling the pain.
But this strategy may not always work. The intensity of pain suffered from a
wrong decision may have some relation to the price paid for the product.

Your insula, for instance, may be activated each time you see the frightfully
expensive designer dress you outgrew five years ago. That is why it is still buried
deep in your wardrobe, waiting to be “repaired”.

Ant Auction

Suppose you want to buy the coin. Assume that one auction offers the coin for an
initial price of Rs 100 and the other, at Rs 2,500. You choose the one with the
lower price. Unfortunately, several buyers have the same idea. So, the price is
eventually bid up, well past Rs 2,500!

A day later, the coin with the higher initial price is bid at Rs 5,000 while the other
coin is bid at Rs 5,250. And your friend enters the auction for the first time. Which
will she choose?

She may prefer the coin that has a bid price of Rs 5,250. Why? More people
have bid for this coin, pushing its price from Rs 100 to Rs 5,250. And that,
perhaps, signals that this coin is better than the other one.

Information asymmetry

Your friend may come to such a conclusion because she does not have as much
information about the quality of the coin as the seller does (information
asymmetry). So, she banks on the collective wisdom of the crowd that created
the auction traffic.

It is the same logic with ants! If you place two lumps of sugar at some distance
from each other, ants will soon traffic around one lump. Why? Each ant simply
follows the trail (called the pheromones) left by the ant before it.

But there is more to the auction than just ant-logic. When you place the highest
bid, you believe that you already own the coin. Besides, you have spent so much
time on the bid process.

You, therefore, feel the urge to revise your offer when your bid is bettered. This
coupled with the ant-logic pushes products with lower initial price to eventually
sell for more — sometimes more than what they are actually worth!

Chocklates

Years ago, a psychologist conducted an experiment with a group of children in a

nursery school. He offered them marshmallows but with a condition. The children
would get only one if they ate the marshmallows immediately. But they could
have another one if they waited for 15 minutes without eating the first one. Some
children who could not bear the sight of the marshmallow in their hands ate it
immediately. Others waited patiently and got to eat two. Much later, the
psychologist followed their progress in life. And what he found was interesting.

Battling with problems

The children who waited patiently did very well in high school, and later in their
careers. Those who popped the sugary cube into their mouth immediately were
found to be irritable, sulky and battling with emotional problems.

Now, what is the connection between delaying gratification and being

(economically) successful in life? The researchers found that the children who
delayed gratification did so by diverting their attention from the marshmallows to
playing toys and singing songs. And that is what made them successful in later
years. How?

Towards achieving goals

You can achieve your objectives if you can deal with self-control; research shows
that intelligence is important for success but self-control is more important. The
children at the nursery school were displaying their attitude towards achieving
their goals (getting two marshmallows) at a very young age.

You and I can live on a healthy diet and delay the mouth-watering desserts for
the weekend. We can also delay our extravagant spending and instead
concentrate on our retirement savings. All of which means that delaying
gratification pays, economically.

Credit-card premium

Consider this. Two MIT professors conducted a real-life auction for buying tickets
to a certain game in the NBA league. Half the subjects had to pay cash and the
other half, credit cards. The study found that the average bid through credit card
was twice as much as that of the cash bid! The authors called it the credit-card
premium. The reason for such premium is the same — the pain of debit is less
with plastic than with cash. So, we yield to the temptation, spending way beyond
our means. And that could drive a huge hole in our bank account — eventually.

Consumer behaviour

We all make impulsive purchases with credit cards. You are window-shopping
and then you see this interesting object that could add character to your living
room. The object — a piece of modern art that is difficult to describe — is
expensive. But you can use your credit card to make the purchase. You do so!
Why?

Paying cash is painful. Economists have conducted several experiments to

document consumer behaviour. We buy only if we believe that the utility that we
can derive from the product is greater than the pain we will suffer from paying for
it.

Credit card alters this equation. It numbs the pain of payment, as cash moves out
of our bank account several weeks later. My friend paid 40 per cent more for a
similar clock. Did the mode of payment (credit card for ebay) have anything to do
with it? My friend denies so. But research conducted in similar area suggests that
credit cards could be a factor driving the economics.

Discount sales

Pricing signals

As buyers, we have less information on the product than the sellers do. We,
therefore, discern signals from the product pricing. And discount buys do not
always signal well. Why?

We typically evaluate the quality of a product from its pricing — more expensive
a product is, the better we presume is its quality. And a discount buy offered by a
name-brand store signals inferior quality. Here is why.

As the utility of a product is based on perception, we logically derive less

satisfaction from a discounted product than when we pay full-price for it.

The reason is that an unexpected discount from an unlikely source (name-brand

stores) makes us suspicious. And that subtracts the utility value.

Note that our satisfaction is only bound to be higher when we look for bargain
buys and find one. That is why we pass off discount buys at name-brand stores
and yet scout for such buys at local stores, which are expected to make such
offers.

Expectations and behaviour

Neuroeconomists have been studying product pricing and consumer behaviour

for a while. Consider this experiment conducted at Stanford University. A group
of students were provided a name-brand energy drink at full-price and another
group, at a discounted price.
The subjects were then asked to solve some puzzles. The researchers found that
the subjects who paid discounted price consistently solved fewer puzzles than
the ones who paid full-price, even though the drinks were identical.

DIM LIGHTS

You may have heard about Richard Thaler and Cass Sunstein and their
book Nudge. Nudge, according to Thaler, is a small feature of the environment
that captures our attention and alters our behaviour.

Dim lights in restaurants can be a nudge! Research shows that such lights can
make us eat more. It is also argued that we eat more if the lighting is very bright!
If you and I can be nudged to eat more, can we be nudged to eat healthy food?

Catching your attention

Suppose you are attending a small party. On the dining table, you see some
mouth-watering desserts and colourful cut fruits. Which would you prefer?

If you want to choose fruits but end up eating the dessert, do not be too hard on
yourself. You were, perhaps, nudged to eat the dessert. You can just as well be
nudged to eat the fruit. How?

Experiments have shown that if the fruit bowl is elevated and is kept in such a
way as to catch your attention, you will head for the health platter. Remember,
nudge is about catching your attention. Sometimes, a printed card on the dining
table that states that the average Indian eats more fruits can nudge you towards
the colourful platter! The reason is because we like to stick to averages.

Build on positive nudges

It is important that our host does not offer only fruits. If that were so, you and I will
be heading for another place that provides sinful desserts.

Nudge instead allows you to make your own decision. Renaming carrots as X-ray
vision carrots allows you to savour the richness and nudges you to choose
vegetable over a more-tasty less-healthy food that is also available at the table.

We can choose to nudge ourselves to health at home. You can, perhaps, start
using small plates that make normal portions look large. And then build on such
positive nudges. Healthy eating.

Discount for Cash

FRAMING BIAS. If they ask you to pay 2 % more for CC would you pay. Instead
they framed it as 2 % discount for cash pyment.
STRIKE

Fear of rejection

Experimental economics provides an answer to this question. Consider the

Ultimatum Game. In the original version of this game, one subject was given,
say, Rs 100 and was asked to share the money with her pair, another subject.
Let us call the former, the Giver and the latter, the Acceptor.

If the Acceptor accepts the Giver’s offer, both keep their share. So, if the Giver
offers Rs 10, the Acceptor keeps Rs 10 and the Giver, Rs 90. If, however, the
Acceptor rejects the offer, both go home empty-handed.

The results of the experiment showed that Givers’ were willing to offer close to
50 per cent. One reason would be the fear of rejection by the Acceptors; for then,
both parties get nothing.

Fairness matters

A different version called the Dictator Game was, hence, tested. In this game, a
Giver kept her booty even if the Acceptor rejected the offer. Still, 76 per cent of
the Givers’ chose to split evenly. Why? Economists argue that the existence of
fairness is the reason for the even split. And this, perhaps, is the reason for the
agitation at the factory.

A new product launch meant that the firm would push up profits. The factory
workers wanted at least 10 per cent share of the profits while the owner was
willing to part with only 5 per cent.

Classical economics argues that workers should accept the 5 per cent hike, as
they are better off compared with no hike at all. That is called rational
maximisation. The workers, however, are driven more by a sense of fairness
than by rationality. They are, hence, likely to reject the offer and strike even
though it is self-defeating.

Availability heuristics

Behavioural and social psychology throw some light on this subject. Consider
what behavioural psychologists call as the availability heuristics. This is bias that
prompts us to make a decision based on events that recently happened. Rahman
just won the Oscar. Illayaraja did not, nor did R.D Burman. So, it is easy for us to
label Rahman as the “greatest ever”.

It is the same logic that prompts us to state that Tendulkar is the “greatest ever”
cricketer soon after he hits a century. It is, perhaps, for this reason that the
basketball players are required to wait for at least five years post-retirement
before they can be nominated to the US Basketball Hall of Fame.

The feel-good factor

Then, there is the fact that we watched Rahman receive the awards. This creates
a personal connection to what he has achieved and makes us feel good about
ourselves.

Social psychologists call this “Basking in Reflected Glory” (BIRG). It refers to

behaviour where an individual identifies herself with a successful person, whose
glory she actually had no part to play!

Robert Cialdini, a psychology professor, documented this behaviour years ago.

In one study, he found that undergraduate students were more likely to wear their
university logos on a Monday morning if their college football team won a
weekend match.

BIRGing is also the reason why soccer fans claim that “we” won after their team
wins an important game. This connectedness to the other person’s glory may be
a driving factor in concluding that Rahman is the “greatest ever”.

So, until another great musician wins more Oscars, Rahman may, perhaps, enjoy
the “greatest ever” label and the economics that comes with it.