Question
Kathy is in a dress shop and finds a nice hat. The tag price is $65 and she thinks it is too expensive. She decides
Kathy is in a dress shop and finds a nice hat. The tag price is $65 and she thinks it is too expensive. She decides not to buy and leaves the shop, thinking that she would have purchased the hat if the price had been no higher than $58.
About one hour later, Kathy walks into another shop and finds the exactly same hat with the price tag of 'originally $90 and now 30% off'. She is attracted to the promotion deal and decides to buy $63. In the meantime, right next to the counter's desk, she finds displayed another hat of the same brand and design but of different color priced at $90 without discount. She feels even more satisfied of her decision.
When Kathy is about to open her wallet, the salesman offers another promotion option of lucky draw game: Kathy can roll the dice and enjoy a lower price of $39 if she rolls a 1 or a 6, but she needs to pay $66 if she rolls other numbers. Either case, she is obligated to buy the hat if she accepts the lucky draw offer. After a minute of thinking, Kathy declines the lucky draw game.
When Kathy is about to pay, the salesman points to their payment policy written on the wall: "2% surcharge for a credit card payment', which would charge $64.26 on her credit card. She pays $63 in cash, thinking she might have not purchased the hat if the shop's pricing was '$64.26, with the cash discount price of $63'.
On the way home, Kathy meets a friend who gets excited about the hat Kathy bought and offers her $65, in cash, for the hat. Kathy refuses to sell it and keeps heading home, dancing to Pharrell Williams' hit song 'Happy'.
Question: Briefly discuss Kathy's shopping behavior from micro/behavioral economics perspectives.
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