Tuesday, March 28, 2006

Every day risk aversion and a solution

It is amazing how in every day dealings we find real risk aversion and amazingly low tolerance to ambiguity. I have been selling a car on eBay. I had the usual pile of enquiries about this and that and when the sale ended the winner was a chap who had fired many questions my way. The car is a good car, about three years old, with a full service history and well looked after. Once he had won the car I received a phone call from the winner asking for a series of numbers from the paperwork. When I enquired as to why he wanted to check with the authorities if the car was not stolen, part of a finance deal etc. Fine I gave him the details and he came back within the hour and said that the car had checked out fine but one of the document numbers was wrong. We double checked and I phone the authorities. Indeed the number was wrong. The explanation I got was that there must have been an administration error as everything else checked out. I relayed this on to the winning buyer and he wasn't convinced. So I gave him the details of the person I had spoken to so that they could confirm that this was an error and everything was fine.
He duly rang them and then came back to me. "I'm not sure, I need the paperwork 100%, it's got to be 100% if there is an error it's not 100%."
I asked how this affected the car and the sale.
He replied "I'm not certain what to do now. The number isn't 100%"
I responded (calmly) "As you heard the chap at the licensing agency it appears to have been a computer error on their behalf. Everything else checks out. I will personally vouch for the car and write you a letter that it is fine. I've had it since new."
"I'm not happy, that number isn't right".
Thinking that some form of guarantee might work unstick this situation I suggested, "Look I will sign a letter to you stating that if the car turns out not to be mine I will refund you the full amount"
"Yes but the number, it's just not right".
Eventually the only way to unstick the situation was to remind him that he should have checked this before bidding and that the bid was legally binding. That did the trick. The suggestion of a threat of even more dire consequences resulted in a final "Well I'm sure it will be alright. You sound like a nice guy, someone I could trust really."
It's truly amazing how when faced with real risk aversion (remember risk is perceptual and therefore individual) presenting a greater risk can create movement with the chronically risk averse!

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