The rut of predictably irrational behavior

September 15, 2009 at 5:29 am Leave a comment

Predictably Irrational, by Dan Ariely, is a fascinating collection of research about decision-making psychology.

Above is a great video produced by of Ariely, a professor of behavioral economics at Duke University, presenting examples of cognitive illusions during last year’s The Entertainment Gathering (EG).

Over at Coding Horror, Jeff Atwood (no relation, though my brother has the same name) explains “nine ways marketing weasels [use behavioral economics] to manipulate you” and “how we can avoid falling in the rut of predictably irrational behavior”:

#3: It’s “Free”!

Ariely, Shampanier, and Mazar conducted an experiment using Lindt truffles and Hershey’s Kisses. When a truffle was $0.15 and a kiss was $0.01, 73% of subjects chose the truffle and 27% the Kiss. But when a truffle was $0.14 and a kiss was free, 69% chose the kiss and 31% the truffle. According to standard economic theory, the price reduction shouldn’t have lead to any behavior change, but it did.

Ariely’s theory is that for normal transactions, we consider both upside and downside. But when something is free, we forget about the downside. “Free” makes us perceive what is being offered as immensely more valuable than it really is. Humans are loss-averse; when considering a normal purchase, loss-aversion comes into play. But when an item is free, there is no visible possibility of loss.

You will tend to overestimate the value of items you get for free. Resist this by viewing free stuff skeptically rather than welcoming it with open arms. If it was really that great, why would it be free?

Free stuff often comes with well hidden and subtle strings attached. How will using a free service or obtaining a free item influence your future choices? What paid alternatives are you avoiding by choosing the free route, and why?

How much effort will the free option cost you? Are there non-free options which would cost less in time or effort? How much is your time worth?

When you use a free service or product, you are implicitly endorsing and encouraging the provider, effectively beating a path to their door. Is this something you are comfortable with?

More about Ariely and his must-read book can be found at the official Predictably Irrational website.


Entry filed under: etc, think. Tags: , , , , , .

NYT: Google Launches Internet Stat Center Harvard University to offer Doctor of Education Leadership Program

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed

Jason R. Atwood

I'm an avid trail runner and doctoral student at U.C. Berkeley who studies motivation and the relationship between the mind and body. This blog is a forum to share research, news, and musings about these topics of interest. More

Play is the beginning of knowledge.

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 88 other followers

Twitter Feed

%d bloggers like this: