Mental Transaction Costs

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The concept of mental transaction costs, what it costs to make the myriad informational choices in terms of effort, works against the widespread adoption of Micropayments, argues Clay Shirky.


Description

Mental Transaction Costs, comment by Clay Shirky:

"The people pushing micropayments believe that the dollar cost of goods is the thing most responsible for deflecting readers from buying content, and that a reduction in price to micropayment levels will allow creators to begin charging for their work without deflecting readers. This strategy doesn't work, because the act of buying anything, even if the price is very small, creates what Nick Szabo calls mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price. The only business model that delivers money from sender to receiver with no mental transaction costs is theft, and in many ways, theft is the unspoken inspiration for micropayment systems. Like the salami slicing exploit in computer crime, micropayment believers imagine that such tiny amounts of money can be extracted from the user that they will not notice, while the overall volume will cause these payments to add up to something significant for the recipient. But of course the users do notice, because they are being asked to buy something. Mental transaction costs create a minimum level of inconvenience that cannot be removed simply by lowering the dollar cost of goods. (http://shirky.com/writings/fame_vs_fortune.html)


More Information

Further arguments by Nick Szabo, at http://szabo.best.vwh.net/micropayments.html