Reader responses: BIP! cards

Some time ago, I posted an open question about why Chileans keep such low account balances on their subway “BIP!” cards.
Glen and Alisha came back with fantastic responses, each worthy of their own post.
Alisha offers the cultural explanation (so like her..):
I’m sure that Glen gave you some rational explanation, but given that I’m a mere aspiring political scientist, I will give you a more interpretive response:
1)  Chileans love waiting in lines.  It gives them another form of oppression to discuss at work–I waited in line for 10 hours today and finally got on the metro…then I walked 8 miles through the pouring rain and smog after working a 15 hour day (with a 4 hour lunch break).

2) Chileans are irrationally afraid of crime.  Despite the safety of Santiago, they go nuts about crime, especially on the metro.  Maybe they think flashing a 10.000 peso bill will set them up to be pick pocketed (or at least get their Bip card ripped off)??  So maybe it’s strategic (or cool) to look poor among the rich, and then the poor are just poor so everyone gets miniscule sums on their metro cards.

Glen’s response was worthy for publication in minor journals of economics. He shows that it is economically rational for a Chilean to keep account balances as low as 1414 pesos. The full analysis is below — warning: The words “first-order conditions suffice for optimization” do appear. And .. oh lordy … it is glorious.


Thanks Glen and Alisha!


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