The Hindu Business Line : Flyer points, restaurant bills and helmets

"Airline companies offer frequent flyer miles points. That's a smart way of bribing a corporate executive to fly with you," said China opening up a discussion that was sure to hot up. "Crap," said Wafers. "By no stretch of imagination is that offer a bribe."

"Ha, madam; one year in the corporate sector and you have still not lost your innocence," remarked China. "Prove the bribe," charged Wafers.

China was unfazed. "Let me explain with an example. Let us say that the airfare from Destination X to Destination Y is Rs 10,000 by J Airways and Rs 8,000 by A Airlines. J Airways offers you frequent flyer points; A Airlines does not. Your air ticket is paid for by your company but the airline companies make it a point to credit the frequent flyer miles points to you. Now given a choice, tell me, which airlines will you prefer?"

Wafers was honest. "I guess J Airways. I could always explain to the company saying J is more comfortable."

Agreed China. "Precisely. You do so although it costs your company more. Yet if you were paying out of your pocket you would have preferred A Airlines." Wafers couldn't but agree.

"You mean that if I pay Rs 2,000 extra for a product I would expect value of Rs 2,000 extra. But I would be quite happy to make my company pay Rs 2,000 extra if I get value of even Rs 500." Wafers had hit pay-dirt.

China applauded, "Exactly. The Rs 500 comes to you at zero cost. That's why airlines offer frequent flyer points to individuals and not to corporates. It is easier to influence a person who is spending someone else's money than his own. And if you are influenced, I say you are accepting a bribe."

Wafers nodded. She now understood why some executives paid out of their credit cards and then got reimbursement from the company. The reward point was the payoff.

Going Dutch

The conversation then moved towards some small talk. A little while later Wafers said, "I have a thought, though I don't know how to place it. You should be able to help out." China was all smiles: "Shoot."

"Let us say four of us go for dinner. We decide to split the cost equally." China nodded and said: "Yup, going Dutch."

Wafers asked, "Is going Dutch wise or should we allow each one to pay for what he or she has for dinner?"

China spoke to no one in particular. "Dutch versus TTMTTM (that-that-man-their-their-money)? Well, you tell me." He had a fair idea of what Wafers was hinting at but wanted to hear it from her.

"When four people go Dutch, the cost of spending every additional rupee is only Re 0.25 for me. So when I have to decide whether I should order that expensive soup which I have never tried before and which costs Rs 120, the decision is easy. I will order it because for me the incremental cost is only Rs 30," said Wafers with admirable clarity.

China tried to test her. "But you will have to pay for everyone else's expensive soup as well, isn't it?" Wafer was ready with her response, "Yes. But I will have to do so irrespective of whether I have my soup or not!" China goaded her further; "So what is your conclusion?"

"When we pay for exactly what we have, I think we tend to be more careful. When we go Dutch we tend to be less careful. Restaurants gain by allowing people to go Dutch." China applauded. "Bravo Wafers, bravo. That's precisely the point about spending other people's money."

Rash Drive

Rinku, the journalist, had been unusually quiet all along. He now compensated for it with an out-of-the-ordinary statement. "The analysis on flyer point and on restaurant bills was cool. I have something on helmets." Both Wafers and China almost simultaneously said, "Ride ahead."

"I understand some States are making helmet wearing mandatory," he remarked. "Yeah," said Wafers. And added, "That's good because it would reduce deaths by accident." Rinku disagreed. "Helmets increase the incidence of accidents." China heard the remark with interest but didn't volunteer a comment.

Wafers couldn't keep quiet. "Helmets protect you when you have an accident. Every neurosurgeon worth his salt has gone on record recommending helmets. How can it increase the incidence of death?"

Rinku was unfazed. "Simple. Helmets change a rider's behaviour. If a rational person knows he has more protection, it tempts him to take more risks. Helmets insure against accidents and so increase the insured's willingness to take risks. He could begin to drive at breakneck speed or might resort to rash driving. This increases the death rate."

Wafers saw the logic but refused to buy it. "Are you suggesting that we should ban helmets?" Rinku took the fizz out of the question saying, "I don't know. I am just putting a point across.".

For once even the encyclopaedic China didn't know how to react.

Racy@TheHindu.co.in

http://Racycases.blogspot.com

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