Psychology
by Dan Ariely
Are our mistakes predictable?
Standard economics assumes we weigh costs and benefits sensibly. Dan Ariely spent years running experiments that show we don't. The surprise is that our mistakes aren't random. We make the same ones, in the same direction, again and again, which means they can be predicted and planned for.
Hear a sample · read by Laura
We rarely know what something is worth on its own, so we judge it by what's next to it. Williams-Sonoma struggled to sell a breadmaker until it put a bigger, pricier model beside it. Next to that, the first one looked sensible, and its sales rose.
Offered a Lindt truffle for 15 cents or a Hershey's Kiss for 1 cent, most people chose the truffle. When Ariely cut a cent off both, making the Kiss free, most switched to the Kiss. Free gives us an emotional lift that makes us forget the downside.
Duke students camp out for days for the chance of basketball tickets. Ariely and Ziv Carmon rang students who'd won them and students who hadn't. The winners wanted many times more to sell than the losers would pay. Once something is ours, we value it more than anyone else does.
In one of Ariely's studies, people given mild electric shocks took a painkiller that was really a sugar pill. Those told it was an expensive new drug reported more relief than those told it had been discounted. What we expect changes what we actually feel.
The decoy
The Economist offered a print-only deal nobody wanted, just to make print plus web look like a bargain.
Anchors
The first price you see sticks, and shapes what you're willing to pay later.
Zero cost
A price of zero makes us act oddly, often choosing a worse thing just because it's free.
Social vs market
When an Israeli day care started fining late parents, more parents turned up late.
Ownership
Once we own something, we value it more than anyone else would.
A story from the book
When Salvador Assael started selling Tahitian black pearls, nobody wanted them. So he persuaded the jeweller Harry Winston to show them in his Fifth Avenue window, beside diamonds, with enormous price tags. Soon they were prized. Ariely's point is that the first price we see becomes an anchor.
One thing to try
Next time a free offer pulls you in, like free delivery if you spend £10 more, imagine the free part cost 1p instead. If you wouldn't buy it then, you probably don't want it. Ariely's experiments suggest the word free, more than the saving, is doing the persuading.
Knotd has the key ideas from 250+ non-fiction books, each in a few minutes, in plain words. Predictably Irrational comes with a Name That Idea round to make it stick.
Get the whole book on KnotdOpen in the appAre our mistakes predictable? Standard economics assumes we weigh costs and benefits sensibly. Dan Ariely spent years running experiments that show we don't. The surprise is that our mistakes aren't random. We make the same ones, in the same direction, again and again, which means they can be predicted and planned for.
Everything is relative; Why free wins; The high price of ownership; The price changes the pill.
Next time a free offer pulls you in, like free delivery if you spend £10 more, imagine the free part cost 1p instead. If you wouldn't buy it then, you probably don't want it. Ariely's experiments suggest the word free, more than the saving, is doing the persuading.
Yes. Knotd has the key ideas from Predictably Irrational in a few minutes, in plain words, plus a Name That Idea round to test them. It's one of 250+ non-fiction books in the app.
