Predictably Irrational

Predictably Irrational – Dan Ariely

Prices are affected by anchors and memory of those anchors

Zero – Free – Emotionally hot button – when free we forget downside

Social Norms vs. Market Norms – Market norms force out social norms

We under predict passion on our behavior – Looking from one emotional state to another is difficult

Fleeting impulses distract from long term goals

Procrastination – means for tomorrow

Tight restrictions on freedom is best cure for procrastination

Self control credit card to limit spending

We overvalue what we have – endowment effect

  • Fall in love with what we have
  • Focus on loss instead of gain
  • Assume others see transaction as we do
  • The more work you put in the more attached you become
  • We can become owners even before we own
  • Not limited to things

More options distract from objective

Cannot stand closing doors on alternatives (fear of loss)

We always give something up to keep those options

Take into account consequences for not deciding

Previous held positions cloud our point of view (anchoring)

Placebo – I shall please – work because of 1) Belief 2) Conditioning

Price can determine perceived value – can change experience

When given opportunity, many honest people will cheat – individuals are only honest to the extent it suits them (including desire to please)

Preconditioning can improve honesty

People will cheat more if removed from money (tokens)

It is difficult to get someone to understand something when his salary depends on him not understanding it

People may sacrifice personal utility to gain reputational utility

People are susceptible to irrelevant influences from their environment