Almost a century ago, the economist John Keynes famously predicted the emergence of a “leisure society” with ample free time. Reality turned out to be very different. Today, time is a scarce resource. Our “time poverty” leads us—consumers and organizations—to trade money for speed. For example, people are willing to pay more for Internet connections that download more megabits per second (Mbps). That way, they get information faster. They are buying time.

But there’s a catch: Although increasing speed saves time, physics dictates that the minimum time to produce anything is bounded at zero. This means that speed increases have decreasing marginal returns. For example, Figure 1 plots the time to download 1 Gigabyte as a function of Internet speed. As can be easily seen, the time savings level off quickly.

That levelling off in and of itself isn’t a problem. The problem arises in how people perceive, value, and pay for speed increases. Consumers may be surprised to learn that upgrading from 5 to 25 Mbps, that is adding 20 Mbps to your bandwidth, implies time savings of 21 minutes per gigabyte, while the increase from 25 to 100 Mbps, , adding 75 Mbps, buys you only 4 minutes. Our research shows that generally people are poor at inferring time savings from speed increases. They overestimate time savings provided by products at the high end of the speed continuum (e.g., an increase from 25 Mbps to 100 Mbps), and therefore overpay for them. Also, they do not appreciate enough the time savings provided by products at the low end of the speed continuum (e.g., an increase from 5 Mbps to 25 Mbps), and therefore don’t choose these cost-effective options.

What’s more, our research shows that when we correct the misperception by creating a different metric based on time, not speed (e.g., seconds per Megabit), people reevaluate their options and their willingness to pay for top speeds is greatly reduced.

Poor intuitions about the speed-time relationship are problematic for two reasons. First, in recent years, many industries have adopted standard performance metrics that allow consumers to make “apples-to-apples” comparisons between available offerings, but these standard performance metrics are almost always speed-based, not time-based. For instance, Internet connections as above are touted in terms of Megabits per second instead of seconds per Megabit, printers in terms of pages per minute instead of minutes per page, and home appliances (like washing machines) in terms of rotations per minute instead of minutes per rotation. Such interventions start from the assumption that consumers can easily translate changes in speed to changes in time. However, our findings suggest that this assumption is incorrect.

Second, the market price of speed increases is often constant regardless of whether the increase happens at the low-end or the high-end of the speed continuum. We explored the relationship between speed and price in two product categories where speed metrics are prevalent in the market and where consumers are often motivated by a desire to save time: Internet connections and printers. In Figure 2, we plot how much people are paying in the USA each month for additional speed (as measured in Mbps). We find that prices increase linearly with speed. Consumers keep paying the same amount of money for faster Internet connections even when the benefit from additional increases in performance taper off to marginal returns. The same pattern of results holds for printer prices.

Of course, willfully taking advantage of consumers’ flawed understanding of the speed-time relationship can hardly be seen as good marketing: companies profiting at the expense of consumers are usually seen as behaving unethically. The widespread availability of speed metrics may simply be the result of a general product orientation among companies. However, now that our studies document the implications of a speed focus, the decision to leverage the vulnerability of consumers becomes a decision with ethical implications.