Dan Ariely's fascinating book, Predictably Irrational - The Hidden Forces That Shape Our Decisions, gives us insight into the reasons that most people don't make smart, rational choices. He explores the impact of relativity, anchoring, free offers, social norms, ownership valuation, price conditioning and non-cash cheating.
Relativity captures the concept that that most people must see a product or service in context with other like things before they know if this is something they want.
Anchoring is our practice of establishing a particular price to establish the worth of a product.
Our captivation with free offers often moves us to make purchases we would not otherwise consider.
Social norms can influence us to volunteer our service when we would otherwise be unwilling to provide discounted service. When money is involved we tend to use market value to assess the situation.
Once we own something, we become vested and tend to elevate the value of the item.
Price conditioning can cause us to believe that a higher cost product delivers higher value.
Non-cash cheating takes many forms from increasing the value of a lost insured item to wearing and returning garments. It is easier to rationalize these actions when cash is one step removed from the acts.
His excellent examples for each of these concepts provide a new lens for considering rational and irrational decision-making.
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