A friend loaned me his copy of Predictably Irrational, by Dan Ariely. Ariely's a behavior economist, exploring all the ways people don't react in quite the same ways theory predicts. It's a fascinating area of research, a blending of economics and psychology. The book itself is well written and the content makes you think. But it goes way too far.
Because people don't act as theory predicts, Ariely proclaims they are irrational. In reality, the theory doesn't capture all the elements in play (or Ariely's not acknowledging they do). For example, Ariely dedicates chapter three to how people will get something just because it's free, even if it's not the better deal. They'll choose the free $10 gift certificate over a $20 gift certificate which costs seven dollar (effectively choosing $10 over $13). But people like getting things for free. Even if it's not really free, even if we know it's not really free.
Ironically, Ariely said it best: "FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is." (p54) If it gives us that emotional charge, it really is more valuable. People also gamble though few will think they actually come out ahead. The joy comes from those few times you win. That joy, that emotional charge of getting something for nothing, is valuable to people and they'll gladly pay for it in the form of a lost opportunity.
My theory is easily testable (though expensive). Start by offering the $10 gift certificate versus $20 certificate for $7. Then increase that value from $20 to $30 then $40 then $50, steadily increasing the (opportunity) cost of the indulgent from $3 to $13 to $23 to $33. I'll bet you'll see more people start grabbing for their wallets, rationally determining that the joy of FREE! isn't worth the cost.