behavioral economics

Why People Are So Mad at ClassPass’s Price Hike

ClassPass, a fitness-booking tool, annoyed a lot of people yesterday. As Susan Rinkunas wrote on the Cut, the company announced it would be raising the price of its unlimited-classes package in New York from $125 (it had been $99 until last July) to $190, plus tax, starting in June, and the backlash was instant. “ClassPass roped us in at $99/month, now wants to charge $190/month FOR THE EXACT SAME SERVICE,” wrote The New York Times Magazine’s Jenna Wortham in one of many disappointed tweets.

Sure, this is one of the zillion mini-outrages that hit the internet every day, which depart just as abruptly. But it is also, believe it or not, an interesting glimpse at a key part of human nature: How viscerally and personally we take matters of fairness, and how the concept sometimes spreads beyond its “logical” borders.

Since humans are such social animals, the question of whether and to what extent we’re getting ripped off has been very important, evolutionarily. There’s a reason why there’s evidence that even kids as young as 15 months old have deep-seated concepts of fairness. Throughout our species’ history, survival has depended on entering into mutually beneficial relationships with others, and throughout that history free riders and con artists have caused a great amount of harm. Now, you can’t jump straight from evolution to present-day behavior — that leads to some pretty shoddy arguments. But it’s been shown in experiment after experiment — as well as in countless anthropological-ethnographic examinations in “their natural habitat” — that humans act “irrationally” in the wake of being ripped off, or the perception thereof.

The most well-documented lab example of this comes from the field of behavioral economics. It’s called the ultimatum game, and it goes like this: You bring two participants in and give one of them, say $10. She can offer however much of it she wants to the other participant, who has the power to either accept that amount or veto it, scuppering the whole deal — no one gets anything. From the perspective of the participant with veto power, and so-called “neoclassical” accounts of human behavior, it doesn’t really make sense to turn down any amount. Even if you’re only offered a dime, that’s a dime more than you’d have otherwise. (Usually the experiments are set up so that the participants are strangers who may never see one another again — it’s not like one of them can veto a deal to prove a point and improve their partner’s generosity in the long run.)

But people turn down fairly generous offers — way more than a dime — all the time. As one meta-analysis explains, “Respondents often decline offers below 20% and frequently refuse offers between 20 and 40% of the surplus.” Meaning it’s not uncommon for someone who is offered $4 of the $10 to say “No — I’d rather have nothing.” The key takeaway here is that when we feel someone is trying to put one over on us, it causes us to act in ways that, examined from another, cooler-headed angle, don’t quite make sense (“make sense” being an admittedly fuzzy, subjective term in this context — there is an endless academic debate about what we mean when we talk about “rationality”).

So, back to ClassPass: Obviously, the company has no obligation to offer its customers steeply discounted fitness classes. ClassPass, like any company, is trying to make money. From the customer’s perspective, if they don’t like the price they can go elsewhere. There was never a good reason, in other words, for customers to “expect” that the deal-price was going to last, or that ClassPass was required to continue providing it. It’s capitalism! If you don’t like my deal, go elsewhere.

Still, the anger is understandable: We’ve got deep circuits in us that fire at even a whiff of a rip-off — even when that “rip-off” is coming from an entity built from the ground up to separate us from as much of our money as possible.

Why People Are So Mad at ClassPass’s Price Hike