This book is an excellent read whether you are a business student or not. It gives a fascinating insight into why we make decisions that are not totally rational or in our long term interest. Few things could sound as boring as “behavioral economics”! This book is anything but boring.
Among other things you will learn why people will steal a coke from a fridge but not cash (i.e why we can be honest in one context and dishonest in another), why people prefer taking medicine that is more expensive even though there is a cheaper version that works in the same way, why we try to save pennies on some things and then spend enormous amounts of money on an expensive meal.
Other areas explored in the book are the attraction of the words “ZERO” and “FREE” when we purchase things, why we find it so difficult to commit ourselves to decisions and why we place a higher price on an object once we own it.
Some great quotes from the book:
Most people don’t know what they want unless they see it in context.
- High-priced entrées on the menu boost revenue for the restaurant because even though people generally won’t buy the most expensive dish on the menu, they will order the second most expensive dish.
- “Tom Sawyer had discovered a great law of human action, namely, that in order to make a man covet a thing, it is only necessary to make the thing difficult to attain.”
- Zero is an emotional hot button – a source of irrational excitement… Pepsi will sell more cans if the label says “zero calories” that if it says “one calorie.”
- Our Propensity to overvalue what we own is a basic human bias, and it reflects a more general tendency to fall in love with, and be overly optimistic about, anything that has to do with ourselves (positive bias).
- In 2004, the total cost of all robberies in the United States was $525 million; every year, employees’ theft and fraud at the workplace are estimated at about $600 billion (automobile theft: totaling about $16 billion in 2004)
Dan Ariely explains the power of price
Business School Grenoble EM International Affairs Higher Education ESC Grenoble Strategy Blog Global Ed Graduate Business School Mark Thomas
Other Book Reviews
Book Review: Predictably Irrational: The Hidden Forces That Shape Our Decisions — Revised and Expanded Edition by Dan Ariely
BlogCritics: “Predictably Irrational is a fascinating book which delves into the world of psychology and how it can affect our day to day living. For example, why is purchasing a higher priced aspirin more important than a cheaper version when one has a pain in the head? It has to do with the placebo effect.”
NY Times: “Obviously, this sly and lucid book is not about your grandfather’s dismal science. Ariely’s trade is behavioral economics, which is the study, by experiments, of what people actually do when they buy, sell, change jobs, marry and make other real-life decisions.”
The Newyorker: “In one example, Ariely and a colleague asked students at M.I.T.’s Sloan School of Management to write the last two digits of their Social Security number at the top of a piece of paper. They then told the students to record, on the same paper, whether they would be willing to pay that many dollars for a fancy bottle of wine, a not-so-fancy bottle of wine, a book, or a box of chocolates.”
Related Blog Articles
Robert Nielsen Blog: “Ariely did an experiment to examine procrastination. He gave his students the choice of when to set the deadline for their three assignments, with the one condition that once they choose a date, they must stick with it or face a penalty for late submission.”
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