Predictably Irrational (edit title)

• Rated 3 stars

“Well-written and engaging, but not enough meat-and-potatoes for my taste. I made a few notes, but found online notes elsewhere. Here goes:

-peoples ain't rational, and we are easily swayed by external circumstances

-The decoy effect is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated.

-The methods of appointing a value to an object with no previous value is susceptible to irrational pricing. A value can be as easily(arbitrarily) assigned as by having a fancy ad with “equally” precious items and a high price tag
-Once we buy a product at a certain price, we become "anchored" to that price, we associate the initial price with the same product over a period of time.
-the author claims that the relationships between supply and demand are based on memory rather than on preferences.[4]

Ariely explicates how humans react to the words FREE! and zero:
-The outcome was consistent: when faced with multiple choices, the FREE! option was commonly chosen. With the opportunity to receive something for FREE! the actual value of the product or service is no longer considered.
FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is.”
This concept of FREE! applies not only to monetary and quantitative costs, but also to time. s
-such a simple concept can be used to drive business and social policy.

Being Paid vs. A Friendly Favor
Ariely speaks in great detail of the differences between social norms—which include friendly requests with instant payback not being required—and market norms—which account for wages, prices, rents, cost benefits, and repayment being essential. He also explains how combining the two creates troubling situations. The author proves that people are happy to do things, but occasionally not when they are paid to do so. In some situations work output is negatively affected by payment of small amounts of money. Other tests showed that work done as a “favor” produced much better results.
- Ariely talks about how social norms are making their way into the market norms. To illustrate, State Farm's slogan, “Like a good neighbor, State Farm is there,” proves that companies are trying to connect with people on a social level in order to gain trust and allow the customer to overlook minor infractions.
-The author concludes that "money, as it turns out, is the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.

Emotion in Decision Making
- influence of arousal on decision making in high-emotion situations.
- they determined that in a stimulated state, the young men were more likely to undergo an action that they would not normally consider.
-Using the data, Ariely argues that other high-emotion situations such as anger, frustration, and hunger have the potential to trigger similar effects on decision-making. In such situations our behavior is fully controlled by emotions.

The Problem of Procrastination and Self-control
-Ariely blames lack of self-control on people's two states in which they make their judgments—cool and hot state.
-In our cool state we make rational long-term decisions,
-in our hot state we give in to immediate gratification and put off our decisions made in the cool state.
-With proper motivations such as deadlines and penalties, people are more willing to meet those deadlines or long-term goals.
-If we, ourselves, set the deadlines, we might not perform well.
-Moreover, we will not start making any progress towards the completion of the task until the deadline approaches.

-Ariely discusses how we overvalue what we have and why we make irrational decisions about ownership.
-The idea of ownership makes us perceive the value of an object to be much higher than if we do not own the object.
-This illustrates the phenomenon of the endowment effect -- placing a higher value on property once possession has been assigned.
-Ariely gives three reasons for which we do not always think rationally when it comes to our possessions. First, ownership is such a big part of our society that we tend to focus on what we may lose rather than on what we may gain. Second, the connection we feel to the things we own makes it difficult for us to dispose of them. Third, we assume that people will see the transaction through our eyes. The author of the book also lists the "peculiarities" of ownership as he calls them.
-One of them is that the harder we work on something, the more we start feeling about them as our own. Take assembling a piece of furniture as an example. Another peculiarity is that sometimes, the sense of ownership comes before the actual ownership, e.g. online auctions.

The Effect of Expectations
Ariely and several colleagues conducted a series of experiments to determine whether previous knowledge can change an actual sensory experience.
-Ariely also states that expectations shape stereotypes.
-expectations can override our senses, partially blinding us from the truth.

”

• Rated 5 stars

“Love the connections made between psychology and economic theory!”

• Rated 5 stars

“Very interesting book and approach”

• Rated 4 stars

“this was a really cool book. the author is a professor at Duke University and a researcher at MIT. the book covers a lot of experiments he made to research human irrationality, from coke vs pepsi challenge, why students cheat on tests, to why people work harder when they dont get paid, to a girl who had 2 boyfriends and couldn't decide which one to stay with haha. all of the experiments were fun to read and you got a sense of his enthusiasm for the work he does. book is 13 chapters long and reads very fast because it is interesting and funny, and shows u how stupid (and irrational) people are. ”

• Rated 5 stars

“Enlightening book about the choices people make, and why. ”

• Rated 4 stars

“Written by MIT behavioral economist Dan Ariely refutes the assumption that the human being behaves in fundamentally rational ways. Hint: We don't! In everything we do, say or feel, we have been influenced by irrational emotions that may or may not have been prudent. It isn't just the lovesick fools you have to worry about making irrational decisions.”

• Rated 5 stars

“Must Read for Anyone who can introspect.”

• Rated 0 stars

“a book about social psychology ”

• Rated 4 stars

“Interesting read.”

• Rated 0 stars

“Take that stupid neoclassical economics!”