behavioral economics

Loss aversion is real. So why do casinos thrive?

What looks irrational often isn’t. Here’s a simple way to decode what’s really going on.

In behavioral economics, the idea of loss aversion is simple: people feel losses more strongly than gains. Losing $50 hurts more than gaining $100 feels good.

By that logic, casinos should struggle; the odds are stacked against the player. And yet, the casino industry is thriving. So what’s going on?

One answer is that people are being irrational. But there’s another way to look at it – one that’s useful if you’re trying to interpret customer behavior that doesn’t seem to make sense.

This is where a simple decoding approach can help. When a behavior looks irrational, step back and ask: What kind of experience is this really? Because when most people walk into a casino, they’re not making a purely financial decision. They’re stepping into an experience.

Once you see that, a second question becomes useful: What tension might this experience be helping resolve?

Take control vs. surrender. Much of modern life demands control – planning, optimizing, getting it right. Over time, that can become exhausting. The casino offers a rare space where you’re allowed to let go. You place the bet. The wheel spins. And for a moment, the outcome is out of your hands. Losing money, in that context, isn’t just a loss. It’s part of the experience of surrender.

Or consider discipline vs. chaos. Daily life often requires restraint – budgets, routines, long-term thinking. The casino creates a temporary break from that discipline. Chaos isn’t a bug. It’s the feature. The money you spend isn’t just money. It’s the price of entering that environment.

There’s also the tension between present self and future self. Loss aversion tends to show up when we’re thinking about the future – “I should save my money.” But casinos are designed to collapse everything into the present moment. Lights. Sounds. Constant feedback. The future self fades. The present self takes over.

And in this case, there’s a more subtle tension at work: agency vs. fate. Even though the outcomes are random, casinos are structured to make you feel like you’re participating – choosing numbers, pulling the lever, deciding when to stop. So at the same time, you’re surrendering control… and exercising it. That sense of possibility is part of what makes the experience compelling.

Seen this way, the decision to gamble looks different. It’s not just about whether you win or lose money. It’s about whether the experience delivers something meaningful.

So how might you use this in practice?

When a customer behavior doesn’t make sense on the surface, try three steps:

  1. Step back from the transaction. Instead of asking “Is this a good deal?” ask: What experience is this creating?
  2. Look for the underlying tension. What pressure might the customer be navigating? In this case, we saw tensions like:
    – control vs. surrender
    – discipline vs. chaos
    – present self vs. future self
    – agency vs. fate
  3. Reframe the decision. Instead of evaluating it in terms of gain vs. loss, ask: What does this behavior help them feel or resolve?

Behavioral science gives us powerful tools. But it often assumes that people are evaluating outcomes in terms of gains and losses. In many cases, the real question is something closer to “was it worth it?” That depends on more than the outcome. It depends on how the experience fits into the tensions they’re living with. Customers aren’t just buying products. They’re resolving tensions in their lives. And sometimes, what looks irrational at the surface level starts to make sense once you see what’s underneath.

If you want to better understand your customers’ seemingly irrational behaviors – and turn that understanding into clearer decisions – let’s talk. Contact me at info at bureauwest.com.

Posted on by Jay Zaltzman

Customers aren’t as irrational as they seem

A core idea in behavioral economics is that customers don’t always behave rationally. From Dan Ariely’s Predictably Irrational onward, we’ve had a language for the ways decisions deviate from purely logical models.

That lens has been useful, but it may also have led us, subtly, in the wrong direction. What if many of the decisions we describe as “irrational” aren’t irrational at all? What if they’re meaningful – but we’re missing the context that makes them make sense?

In my work, I’ve found that what often sits underneath these decisions is tension. Not random inconsistency, but a structured set of competing forces that people are trying to navigate in their lives. Some of those tensions show up again and again:

  • People want to feel independent, but modern life makes them dependent on systems.
  • People want to feel disciplined, but their days are chaotic.
  • People want to express their individuality, but they also want to feel a sense of belonging.
  • People want to become a better version of themselves, but change is difficult.

When we only look at the customer’s specific decision, it can seem inconsistent or even contradictory. But when we look at the tension the decision is helping resolve, a different kind of logic appears.

Take a familiar example: the pickup truck. Drive through almost any suburban neighborhood in the U.S., and you’ll see them – large pickup trucks parked in driveways, often spotless, their beds empty. For many of these owners, the truck is rarely used for hauling or towing. Day to day, it’s used for commuting, errands, and school drop-offs. From a purely functional standpoint, it’s more vehicle than most people need. It’s harder to park, more expensive to run, and less efficient than many alternatives.

And yet, it’s a remarkably common choice. If we look at that through a purely logical lens, it’s easy to see the decision as inefficient, or even irrational. But look at it through the lens of tension, and something else comes into view.

For many buyers, the pickup truck sits at the intersection of independence and dependence. Even if daily life rarely demands it, the truck carries the possibility of self-sufficiency – the sense that “I could handle it if I needed to.” In a world where so much of life depends on systems, services, and other people, that feeling has real value.

At the same time, the truck often navigates a tension between individuality and belonging. It signals a certain identity – capable, practical, grounded – while also connecting the driver to a broader cultural narrative that feels familiar and shared.

Seen this way, the choice isn’t irrational. It’s helping the customer navigate tensions that aren’t visible if we only focus on features, price, or stated needs.

Once you start looking at customer behavior through this lens, patterns begin to emerge. Decisions that once felt inconsistent start to feel structured. What looked unpredictable starts to feel, in many cases, surprisingly coherent.

I explore this lens more fully in my new book, The American Customer: The Hidden Forces That Shape Choice, which is now officially out. The book looks at how culture and identity shape the way people interpret their choices – and why those choices carry meaning that isn’t always immediately visible. It offers a way to move beyond describing behavior to actually decoding it.

The book is available here.

I’ve also been developing these ideas further in a presentation, Decoding the American Customer, where I explore how to identify these tensions and apply them in practice. If that would be useful for your team or organization, please contact me at info at bureauwest.com.

Source: “The American Customer: The Hidden Forces That Shape Choice,” Jay Zaltzman, March 23, 2026

Posted on by Jay Zaltzman

How people make spending decisions

I just read Dan Ariely’s 2017 book, Dollars and Sense.  Admittedly, the book is a few years old, but Ariely’s behavioral economics approach to how people spend is more relevant than ever (and co-author Jeff Kreisler has an amusing writing style!).  The book talks about the irrational ways we spend money and how we, as consumers, can spend smarter. 

Of course, as a marketer, it also makes me think of the flip side: how marketers utilize those same mechanisms to get customers to spend more.  That’s the duality we have to contend with: as consumers, we try to watch out for the very same methods we employ as marketers.  But let’s face it – if we don’t use these methods, there’s a chance our competitors will! 

Here are some of the highlights from the book:

  • Context matters: customers will pay more or less for something based on contextual cues, such as MSRP or where it’s being purchased (e.g., convenience store vs. supermarket).  Even when we know that the seller raised the list price to then offer a “sale,” it still impacts us.  (Yes, even you!)
  • Spending buckets: even though a dollar is a dollar is a dollar, people do “mental accounting.” For example, we might not be willing to spend any more on “luxuries,” but if that same expenditure gets reframed as “education,” then we are willing to spend on it.  Marketers should consider if there are ways to reclassify their products or services to a category customers are more likely to spend on.
  • “Fair” pricing: we consider whether a person or company “deserves” the price they are charging (rather than what it’s worth to us).  For example, we get annoyed at the locksmith who fixes our lock in two minutes and charges $80, but are willing to pay $120 to the locksmith who took two hours and broke the original lock in the process.  Even though we got a greater benefit from the two-minute job, it just seems wrong.  Marketers need to make sure they emphasize all the effort that went into the product or service (Artisanal widgets?  Hours of deep thought?) so customers will feel prices are fair.
  • The importance of language: not only can descriptions make products sound better, they can literally change the way we experience things.  That is, we will enjoy a product or service more when it’s described in a way that appeals to us.  So don’t skimp on copywriting: find out what makes your product or service enjoyable to customers and tell them all about it!

The main thing I took away from the book as a consumer: when deciding whether or not to make a purchase, we should look at opportunity costs, that is, how much pleasure will the purchase provide compared to other ways we could spend our money.

How do your customers make the decision to spend?  It’s worth finding out!  Let’s discuss – email me at info at bureauwest.com.

Posted on by Jay Zaltzman