Sam and I have been far too benevolent in sparing you from unrepetant econ geekery. That is until now.
Similar to New York and Washington DC, residents of Santiago use stored value cards to pay for public transportation — the onomatopoeically named “BIP” cards (based on the beeping sound the machines make after you pay).
(Sidenote: The subject of public transport in Santiago is actually quite fascinating. In 2007, the city undertook a top-level wholesale redesign of the entire system, which was formally largely decentralized. The results have been disastrous, resulting in a precipitous drop in the President Michelle Bachelet’s approval rating. Transantiago is her Iraq War from a public approval standpoint. Some thoughts from the Antiplanner here.).
Anyhoo … an observation that I am currently having difficulty explaining:
When people scan their BIP card, the remaining account balance is displayed on the scanner screen. I’ve noticed that the average card balances are usually less than 1000 Pesos (about $2.20 or 2.5 trips). This means that people who commute on public transport everyday are constantly charging their cards. I usually load mine up with 10,000 pesos each time ($22 or 25 trips). Why waste the time filling it up so often?
What determines the “rational” amount to put on your card?. It must be a balancing act of three factors:
1) The pain you would feel if you lost the balance on your BIP card (i.e. how much you value money)
2) The probability you assign to losing your BIP card
3) The annoyance you personally feel at having to load up your card frequently
But it seems that my preference for keeping a 10X balance to the average Chilean can not be fully explained by 1) (my relative wealth) and there is no reason to believe that 2) and 3) would be so different for me. Chile is not an impoverished country. This can not be explained by working capital constraints. GDP per capita is around $14,000 and is probably much higher along my bus route in my wealthy neighborhood of Santiago. What gives? Any ideas? Why do people wait in line to charge these cards almost every day?
Also, is there an interesting natural experiment on how people value money hidden in the BIP card data? Seems so, but I’m having trouble formulating it.