Predictably Irrational

In this book, the author tries to help you reshape the concept of what makes you and the people around you make the choices. Describing several experiments, the phenomenon of people making the same mistakes time and again in predictable ways is explored, such as buying warranties they do not need, succumbing to peer pressure, and spending more money on expensive indulgences than they budget for. So the main underlying idea throughout the book is that people behave irrationally, but in a predictable manner.

Each of the chapters of the book focuses on one particular irrational way in which people make decisions, describing the experiments that Ariely and his colleagues constructed and carried out to demonstrate the predictability of this behavior. For example, in the first chapter, the author describes how his test subjects could be driven to prefer product A over product B if they were given the choice between A, B, and a similar but inferior version of product A instead of a choice between just A and B. In another chapter on the mysterious power of “free” products, he describes how test subjects who preferred Lindt chocolates to Hershey’s Kisses by roughly 3-to-1 when they were priced at 15 cents and 1 cent respectively, changed their preferences to 1-to-2 when each was discounted by 1 cent. In other words, when priced at 14 cents and 0 cents respectively, people disproportionately changed their preference to the free Hershey’s Kiss, disregarding their preference and the fact that the cost difference in each case—14 cents—is exactly the same. These results lead Ariely to suggest that “free” is a price that causes people to behave irrationally.

The “one main lesson from the research described in this book,” Ariely informs us, “is that we are pawns in a game whose forces we largely fail to comprehend”. Although we may think we are in control of how we make market calculations and economic decisions, he argues, we are actually driven by perceptual reactions, ingrained habits, and “decision illusions” (such as the mysterious power of “free” products) much more than we realize.