Why do we transfer negative emotions about being broke on items that we purchase?
Bottom-Dollar Effect
, explained.What is the Bottom-Dollar Effect?
The bottom dollar effect describes our tendency to dislike products and services that exhaust our remaining budget. We are less satisfied with our purchases if they cause a strain on our finances.
Where this bias occurs
The bottom dollar effect occurs for purchases that deplete our remaining budget. That can be for any purchase made near the end of our paycheque funds but can also occur when a purchase diminishes our allocated budget for a particular type of activity or product.
For example, imagine that you budget $150 a month for dinners out at restaurants. It is near the end of the month, and you have $40 left in that budget, so you decide to go out for dinner with friends. Your group decides to go to one of your favorite restaurants and you spend the remainder of your budget on a menu item that you usually love. Yet, at the end of the dinner, you feel less satisfied with the meal than you normally do, even though the food was the same. Your negative experience is caused because the dinner, in your mind, ends up representing the last of these positive experiences for the month. Your negative emotions associated with running out of money are transferred onto the experience itself, which is known as the bottom dollar effect.
