Verycleanteeth's Reviews > Predictably Irrational: The Hidden Forces That Shape Our Decisions

Ch1:
Explores the ability of a decoy option to determine outcomes.
(The economist subscription, travel to rome or france w/free breakfast)

Ch2:
Our first experience becomes our anchor point that future instances are pegged to and rebound towards like a rubber band.

Anchor points are hard to change, but new anchor points can be created wholecloth by giving people a new experience (starbucks vs. dunkin donuts)

Ch3:
The power of FREE! to disguise the actual cost we pay. The difference between 0 and 1 is just as large as the gap between 9 and 10, but it feels much more significant. We might drive out of our way to get a $15 meal for free, but we won't make that same drive to save $15 on a $500 coat.

Ch4:
Social norms vs. Market norms. People will do a good job for free, or for a good salary, but not for a lousy salary. Living a life based on social norms can be more fulfilling.

Ch5: The influence of arousal. When we are calm and rational we fail to be capable of predicting how we will act when we are instead hot and emotional. Dr. Jekyll may imagine when the time comes he will be able to control his Mr. Hyde, but perhaps it would be better to plan ahead for the irrational emotional state (having a condom on hand for instance).

Ch6: Procrastination & Self Control. Use the power of precommitment to reign in your future self. In a classroom setting students do better when given explicit due dates for their assignments (or even when they choose them themselves) than if they can put it all off to the end of the semester.

Ch7: The high price of ownership. We value things more once we own them than before. This is related to our intrinsic loss aversion.

ex: Final Four ticket holders valued their tickets in the thousands, while potential buyers only considered paying $100-$200, even though they were pulled fromt the same original pull.

This idea of ownership and loss aversion also applies to ideas. Once we learn a particular "fact" about economics, for example, we are not prone to let go of it even if it is shown to be wrong.

Ch8: Keeping Doors Open

If we have too many options available, we may delay or be inactive which can lead to greater losses than if we had just chosen the "weaker" of our options. The differences between our choices are often negligible and we don't take into account the cost of not deciding. It is vital to begin shutting doors when we are overwhelmed with choice.

Ch9: The effect of expectations

So much of what we like or dislike is based on preconceived notions. If we want something mundane to taste exciting, throw an "exotic" ingredient into the description. Our expectations based on previous life experience color pretty much everything we come into contact with.

(Beer with vinegar in it: If you're told ahead of time, it was not liked at all. If told after, it was enjoyed much more.
Asian women do better on math tests if they are primed with questions about their race than if primed with questions about their gender
)

Ch10: The Power of Price

Higher priced pain medication works better than cheap pain medication. The effect goes beyond pain medication as well.

Also, more things should be placebo tested.

CH11: The Context of our Character pt1

People will cheat a little when given the chance. The amount they cheat will not necessarily increase as the chance of getting caught decreases. If people are reminded of the idea of honesty through and ethics code or something before a test they do not cheat.

CH12: The Context of our Character pt2

We adhere to a certain level of honesty when it comes to cash. But nonmonetary abstractions can make us dishonest cheats. We may not take $1 sitting on top of someone's desk, but many will take one of their cokes from the breakroom fridge with few qualms. We just view money differently.

This has huge implications when you think of how business' use nonmonetary abstractions (think frequent flyer miles and the crazy fiscal abstractions on wall street)

CH13: Beer and Free lunches

behavioral economics takes into account human irrationality while standard economics assumes humans maximize assumes people are rational actors maximizing their happiness and costs in accordance with their preferences.

The irrationalities illustrated in this book don't mean we are stupid or weak minded. It's like a visual puzzle. You may KNOW that image A is the same size as image B, but you can't deny image B LOOKS bigger.

We should take irrationalities into account and PLAN for them.