I’m sitting at a local pub, bracing myself for the next round of shots. My eyes are rolling back in my head which means it’s probably time to go home. Good decisions are rarely made at this time of the
night morning, but I’m feeling smarter than ever as the 8 Buttery Nipples stare me down.
(I wasn’t flashed if that’s what you’re thinking. The waitress merely delivered 8 concoctions comprised of Buttershots Liqueur and Irish Cream.)
“ROULETTE!” (clap, clap) “ROULETTE!”
Credit Card Roulette
If you’re not familiar, credit card roulette is a new game that has probably been around since Lord Starks lost his head to a sword.
When you’re at a restaurant (or in my case – a bar), every member of a party gives their credit card to the waiter. The waiter then pulls out each of the credit cards one-by-one. Whichever card is left in the waiter’s hand, after the rest have been passed back, pays for the entire bill.
8 people could pay a bill of $5 – OR – 1 unlucky person could pay a bill of $40.
It’s extremely fun. And most would argue that it’s extremely stupid.
But is it?
Your mom, your sister and your girlfriend would tell you “Yes.”
But an economist may disagree.
The Best Way to Split A Bill
I was reading one of my favorite books, “Predictably Irrational” by MIT professor Dan Ariely. I recommend EVERYONE read it.
He explains that there are 3 ways to pay a bill when you’re with a group of people.
- Everyone pays for what they ordered.
- Everyone splits the bill evenly.
- One person pays for everything.
Using option 1, everyone suffers. No matter how amazing the meal/conversation was, it ends on a sour note when everyone hands over their credit card. It can be especially sour when everyone is trying to figure out who ordered what versus who ate the most of what. What if Ariel orders crab dip, but Sebastian eats most of it? Who pays?
Option 2 isn’t a bad option because it’s simpler than option 1 but only works out if everyone ordered and ate similar items.
Having one person pay for the meal, option 3, is the best option (assuming you eat with the same people regularly). Why?
- Getting a free meal is a special feeling.
- The total suffering is lower than if everyone paid.
Let me explain the Law of Diminishing Sensitivity…
As we pay greater amounts, we suffer less and less with each additional unit. Example: Imagine yourself paying $500. You wouldn’t be happy, right? Now imagine you just paid $300,000 for a house and found an additional charge of $500. I’m assuming you are less mad at the additional $500 than the first $500. Make sense?
Let’s say that paying $10 leads to 10 units of suffering. The next $10 only leads to 9 units of suffering. The next $10 leads to 8 units of suffering, and so on…
If our 8 shot-sucking participants pay $10 each, the total suffering for the group would be 80 units. If the bill were picked up by one person, the total suffering would be 52 units.
Would you rather have 80 units of suffering or 52 units of suffering?
The answer is simple.
7 people leave the table ecstatic. 1 person leaves the table a tad poorer.
It’s like 7 kittens sucking on the teet of the mother.
Her buttery nipple, if you will.
Readers: When you’re with a group of people, how do you divide the check? Is there a strategy you have found to be optimal?