People are Predictably Irrational
Dan Ariely argues that people often rely on this type of flawed reasoning instead of logic when making decisions.
What is irrational thinking?
This principle suggests that humans tend to make decisions based on comparisons, rather than absolute values.
What is relativity or relative advantage?
This strong emotional state can lead to impulsive decisions, a disregard for long-term consequences, and revenge-driven actions.
What is anger?
While discounts can encourage rational purchasing decisions, only this pricing approach triggers an emotional and irrational response from consumers.
What is offering something for free?
The cognitive vias causes individuals to overvalue objects simply because they own them.
What is the endowment effect?
This economic theory assumes that individuals always make rational decisions based on logic and self-interest.
What is traditional economics?
In the subscription experiment, which option acts as the decoy?
What is print only option?
According to Dan Ariely, when something is offered at this price, people tend to overvalue it due to an emotional reaction, even when it may not be the best choice.
What is free (zero cost)?
We forget about this when something is presented to us as free.
What is a downside?
In the Mug Experiment, participants who were given a coffee mug demanded this price to sell it compared to what others were willing to pay (Higher or Lower).
What is a higher price?
The idea that consumers can be influenced to make irrational purchases contradicts this widely accepted economic principle.
What is rational choice theory?
This emotional reaction is driven by our constant comparison to others, leading us to feel bad when we have less than someone else, even if we already have plenty.
What is envy or jealousy?
This aspect of a physical environment, often present in casinos and busy shopping centers, increases risk-taking and impulsive decision-making.
What is noise or a high-energy atmosphere?
Blending these two types of norms can create confusion and unintended negative consequences in social and business settings.
What are social and marketing norms?
Car dealerships and software companies frequently offer this type of promotional strategy to trigger the Endowment Effect, increasing the likelihood of purchase.
What is a free trial (or test drive)?
According to Predictably Irrational, even though humans make illogical choices, they do so in a way that follows these.
What are predictable patterns?
While geese imprint, humans behave in a very similar way by creating a cognitive bias based on their first impressions. What is this called?
What is anchoring?
People are more likely to make irrational decisions in a group setting because of this psychological phenomenon, where they conform to others' behaviors and choices.
What is social proof (or herd behavior)?
This norm is one of the best ways to make workers loyal and motivated, which is why many businesses try to implement this norm into their workplace.
What is a social norm?
This term describes when investors hold onto stocks for too long, refusing to sell even when they should because they overvalue what they own.
What is the Disposition Effect?
Tempur-Sealy uses premium pricing and luxury branding to convince customers that their pillows are superior, even when similar products exist at lower prices—an example of this behavioral bias.
What is the price-quality heuristic?
This concept suggests that humans often base their choices on social cues, like a crowded restaurant or a popular product, believing that “more people must mean better quality.”
What is herding?
In Predictably Irrational, Ariely describes how emotions, particularly excitement or urgency, lead consumers to purchase more of a product when this type of marketing strategy is used.
What is limited-time offers or scarcity marketing?
When this is brought into the exchange, we shift to market norms and become more selfish.
What is money?
When people feel pain from losing something they own, this psychological principle explains why losses feel more impactful than equivalent gains.
What is loss aversion?