The Duke student experience features many “canon events”: your first time getting a band from LL2 Perkins, falling for upperclassmen propaganda on Fizz (The Lemur is Touse), and running out of food points as a freshman, to name a few. But while the first two are just quintessential features of the Duke social scene, the last example, according to some experts, is psychologically inevitable. Funnily enough, in a school oversaturated with finance gurus, we make one of the most common mistakes of behavioral economics in our own eating habits.
Food points fall into several traps of behavioral economics. One is mental accounting. According to the theory of mental accounting, people view the value of money as relative, not absolute. Despite the fact that money is fungible (meaning that every dollar is equal), we mentally separate money into different categories/accounts, and then spend the money differently depending on these arbitrary categories. For example, consumers tend to spend money they get from returning clothes more freely, as they view this as “extra” money, or money that has already been accounted as lost. But there is no rational reason to think of this money any differently: again, all dollars are theoretically equal because of their fungibility.
Mental accounting applies especially well to cases where we don’t think of money in terms of its USD value, particularly when we use the gamified language of “points.” Since food points have already been paid for in our meal plans (prior to us transacting them), we account them as a “loss.” This leads us to spend more liberally, as we have already accounted for the money being spent. Additionally, since we pay for our meals by simply tapping our phone or DukeCard, we never see any physical currency change hands. This further emphasizes the idea in our minds that no real transaction is taking place—food points are “fake” money and buying a meal in WU is not a real monetary transaction because we are not in a saving mindset . This is all well and good until November, when the dreaded “insufficient funds” message appears. This mental disconnect is especially impactful for freshmen, who are only budgeted $13.22 a day, despite the fact that most meals at WU cost significantly more. For example, on the freshman meal plan any entree that costs more than $12.30 (as sales tax is added to all listed meal prices) would cause them to overspend their allotted daily allowance and have to offset with a $5 meal deal later in the week. The freshman plan also only accounts for five meals a week in Wu, so even just purchasing an additional meal or coffee would cause them to be in a serious deficit. Because of this minimal allowance, freshmen have little to no flexibility in their spending habits and often end up paying extra out of pocket by the end of the semester.
The freshman effect can also contribute to a much larger behavioral economics snowball. Almost as frequently as freshmen run out of food funds, you hear upperclassmen explaining that they are “drowning in food points.” This seems strange, as upperclassmen are able to choose our own meal plans. You would think that by our second or third time around the block, we would know our food budgetary needs. What’s more, it is objectively illogical to buy any plan besides A (and this is coming from someone who chose Plan B and is shelling out food points whenever possible). The smallest plan yields the smallest risk of spending more than you need to, and yet here I am with more food points left over than I was given for an entire semester my freshman year. Choosing a higher meal plan is an objectively poor financial decision in most cases, as purchasing a smaller plan and then paying out of pocket would actually lead to less money being spent.
So why do so many of us opt for more expensive meal plans? Behavioral economics would attribute this behavior to loss aversion, or the idea that people feel the pain of a loss more than the satisfaction of a gain. Loss aversion is one of the most powerful psychological factors in economic decisionmaking, and makes consumers more willing to take risks that would avoid a loss, as opposed to a risk that could yield a gain. We do this, often subconsciously, when selecting our meal plans. In choosing more expensive meal plans at the beginning of the year, we risk overspending. But we do so anyway for fear of running out of points as we are more worried about spending/ “losing” real money and paying out of pocket than we are about losing money by purchasing too many food points in the first place.
Duke’s dining hall is not only one of the best in the country, but also a proving ground for decision science. Can we shoulder the shame of using up all our food points, or should we just find comfort in our shared financial flubs? As humans we are imperfect accountants of value, so don’t be too hard on yourself if you’re reading this and your food point balance lists $0.
by Emily McDermott
