Predictably Irrational
Predictably Irrational is a book about human behavior and our decision making process from a behavioral economics perspective. Each chapter describes a force that affects our decision making process, such as social norms, emotions, relativity etc. The author presents a different perspective compared to standard economics, where we assume that all agents are rational.
What makes Predictably Irrational interesting is that the author has conducted several small experiments among students to back up his claims. These experiments show interesting human behavior that is contrary to what we expect.
This book is organized using the scientific method: Each chapter starts with the author forming a hypothesis, conducting an experiment to test the hypothesis, and analyzing the results to draw conclusions about human behavior. Here are some of the interesting conclusions from this book:
  • We make our decisions by comparing each option with another, and end up choosing the relatively best option. Companies use this fact to manipulate our decision making process by putting decoy options. We also anchor ourselves to initial prices.
  • We have an irrational compulsion to keep doors open.
  • Free is irresistable, when choosing among two products, we overreact to the free one. You can offer a great product for a very cheap price, but people would still prefer the inferior product that is free.
  • Social norms make people do things for free that they wouldn’t do otherwise for a small amount of money. Open-source software is a great example.
Here are some interesting experiments mentioned in the book:
  • On procrastination: He lets students choose their own deadlines for assignments, and compares results with where the professor sets deadlines
  • On ownership: Students at Duke go through a very difficult process to obtain football tickets. Those who win the tickets value them at $2,000 to sell them, whereas losers offer $150 for the same experience
  • On social norms: They experiment with giving parents fines for picking up their children late, but it doesn’t work as well as guilt does
  • On relativity: Same circle looks larger when it’s surrounded by smaller circles
  • On cost of zero cost: People prefer $10 coupon for free rather than taking a $20 coupon for $7
Overall, it was a great read. If you’re interested, there is a more detailed summary of the book by Derek Sivers.
December 21, 2009

sarp centel

Sarp is a software developer. He writes about technology, books and software.
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