By Dan Ariely August 12, 2018 ⋅ 5 min read ⋅ Books
Chapter 1: The Truth about Relativity
Why Everything Is Relative - Even When It Shouldn’t Be
We don’t have an internal value meter but rather we focus on relative advantage.
Most people don’t know what they want unless they see it in context.
We are always looking at the things around us in relation to others to compare.
The more we have, the more we want. The solution is to break this cycle of relativity. To not care about others.
The make judgments about absolute value over relative value.
Chapter 2: The Fallacy of Supply and Demand
Why the Price of Pearls - and Everything Else - Is Up in the Air
To sell something at a high price, it’s only necessary to make it difficult to obtain.
Arbitrary coherence: initial prices are largely arbitrary but once those prices are established, they shape not only how much we are willing to pay but also how much we are willing to pay for related products.
First impressions matter.
Self-herding: when we believe something is good/bad on the basis of our own previous behaviour.
The first decision is crucial and we should give it an appropriate amount of attention.
Chapter 3: The Cost of Zero Cost
Why We Often Pay Too Much When We Pay Nothing
There are many times when getting “Free!” items makes perfect sense. The critical issue arises when “Free!” becomes a struggle between a free item and another item.
Choosing between a free $10 gift card or paying $7 for a $20 gift card. The $20 gift card is the optimal choice because you end up with more.
However, experiments consistently show that people pick the free gift card more.
When choosing between two products, we often overreact to the free one.
The concept of zero also applies to time. Time spent on one activity is time taken away from another.
The difference between two cents and one cent is small, but the difference between one cent and zero cents is big.
Chapter 4: The Cost of Social Norms
Why We Are Happy to Do Things, but Not When We Are Paid to Do Them
We live in two simultaneous (but different) worlds - one where social norms prevail and one where market norms prevail.
When social and market norms collide, trouble sets in.
Once market norms enter our considerations, the social norms depart.
If he charged them for the lessons, they wouldn’t be able to afford him.
No one is offended by a small gift because even gifts keep us in the social exchange world and away from market norms.
Explicit prices on gifts switches it back to market norms.
Just thinking about money makes us behave as most economists believe we behave - selfish and independent.
When you’re in a restaurant with a date, don’t mention the price of selections.
When a social norm collides with a market norm, the social norm goes away for a long time.
If someone is paid to do something, don’t ask them to do it for free.
Cash will take you only so far - social norms are the forces that can make a difference in the long run.
Chapter 5: The Power of a Free Cookie
How Free Can Make Us Less Selfish
When we offer people a financial payment in a situation that is governed by social norms, the added payment could actually reduce their motivation to engage and help out.
Once money is introduced into the exchange, you stop thinking about what’s socially right and wrong and you simply want to maximize your gain.
Not mentioning prices ushers in social norms and with those social norms, we start caring more about others.
Chapter 6: The Influence of Arousal
Why Hot Is Much Hotter Than We Realize
We under-predict the effect of passion on our behaviour.
Emotions can take control over our behaviour.
Avoiding temptation altogether is easier than overcoming it.
Chapter 7: The Problem of Procrastination and Self-Control
Why We Can’t Make Ourselves Do What We Want
Giving up on our long term goals for immediate gratification is procrastination.
Tightly restricting their freedom is the best cure for procrastination. The second best is having people pre-commit to self set deadlines.
Without pre-commitments, we keep falling for temptations.
Variable schedule for rewards is more motivating than fixed schedule for rewards.
Chapter 8: The High Price of Ownership
Why We Overvalue What We Have
The first reason is that we fall in love with what we already have.
The second reason is that we focus on what we might lose rather than what we might gain.
The third reason is that we assume other people will see the transaction from the same perspective as we do.
The more work you put into something, the more ownership you begin to feel.
We can begin to feel ownership even before we own something.
Ownership is not limited to material things. It can also apply to points of view and ideas.
Chapter 9: Keeping Doors Open
Why Options Distract Us from Our Main Objective
We work to keep our options open but then we forget to spend the time on what we really care about.
What is it about options that is so difficult for us? Why do we feel compelled to keep as many doors open as possible? Why can’t we simply commit ourselves?
We have doors, small and big doors, which we ought to shut.
What we fail to do is to take into account the consequences of not deciding.
We also fail to take into account the relatively minor differences that would come with either of the decisions.
To make the choice we’ve chosen the right choice.
Chapter 10: The Effect of Expectation
Why the Mind Gets What It Expects
When we believe beforehand that something will be good, it generally will be good.
The way we expect something changes the way we perceive it.
The brain cannot start from scratch at every new situation. It must build on what it’s seen before.
Does expectation triumph over the experience?
If a tree falls in the forest and no one is around to hear it, does it make a sound?
Expectations change the way we perceive and appreciate experiences.
Chapter 11: The Power of Price
Why a 50-Cent Aspirin Can Do What a Penny Aspirin Can’t
Our expectations can affect us by altering our subjective and even objective experiences.
Two mechanisms shape the expectation that make placebos work. One is belief, the other is conditioning.
Should doctors prescribe placebos?
Chapter 12: The Cycle of Distrust
Why We Don’t Believe What Marketers Tell Us
The tragedy of the commons - when we use a common resource at a rate that is faster than the rate at which it replenishes.
Trust as a public good like water and air.
We can repair trust by being transparent.
Trust, once eroded, is very hard to restore.
Chapter 13: The Context of Our Character, Part I
Why We Are Dishonest, and What We Can Do about It
Why are white collar crimes judged less severely than others?
When given the opportunity, many people will cheat.
Once tempted to cheat, the participants didn’t seem to be as influenced by the risk of being caught as one might think.
People cheat when they have a chance to do so, but they don’t cheat as much as they could.
Once they begin thinking about honesty they stop cheating completely.
Chapter 14: The Context of Our Character, Part II
Why Dealing with Cash Makes Us More Honest
Dishonesty is easier when it involves something non-monetary.
Money makes us more honest.
Chapter 15: Beer and Free Lunches
What Is Behavioural Economics, and Where Are the Free Lunches?
When people order out loud, they choose differently from when they order in private.
When you go to a restaurant, it’s a good idea to plan your order before the waiter approaches you and to stick to it.
We all make the same type of mistakes over and over again because of the basic wiring of the brain.
We are pawns in a game whose forces we largely fail to comprehend.