Category I in the table refers to your spending your own money on
yourself. You shop in a supermarket, for example. You clearly have
a strong incentive both to economize and to get as much value you
can for each dollar you spend.
Category II refers to your spending your own money on someone else.
You shop for Christmas or birthday presents. You have the same incentive
to get full value for your money, at least as judged by the tastes
of the recipient. You will, of course, want to get something the recipient
will like -- provided that it also makes the right impression and
does not take too much time and effort. (If, indeed, your main objective
were to enable the recipient to get as much value as possible per
dollar, you would give him cash, converting your Category II spending
to Category I spending.
Category III refers to your spending someone else's money on yourself
—lunching on an expense account, for instance. You have no strong
incentive to keep down the cost of the lunch, but you do have a strong
incentive to get your money's worth.
Category IV refers to your spending someone else's money on still
another person. You are paying for someone else's lunch out of an
expense account. You have little incentive either to economize or
try to get your guest the lunch that he will value most highly. However,
if you are having lunch with him, so that the lunch is a mixture of
Category III and Category IV, you do have a strong incentive to satisfy
your own tastes at the sacrifice of his, if necessary.