Then you could sell it for a price that is aligned to the products around instead of picking a price correlated to the costs and availability of your product. Indeed, when a consumer has no previous reference to a product you could place that product among other highly expensive and luxury products.

Prices can easily become irrational when there’s no comparison or when also the other items of comparison are irrational. There is no direct relationship between price and demand. Supply and demand is not a realistic model.īecause we comprehend the world and assess values based on comparison. Chapter 2: The Fallacy of Supply and Demand Now most people -75% as per Dan Ariely’s MIT experiment- will go for Attractive Mate Two because they can compare it to Less Attractive Mate Three. Less Attractive Mate Three and similar to Attractive Mate Two.Then we add a third one comparable to make two: Imagine there are two good-looking possible mates, mate one and mate one. Interesting stuff isn’t it? The Same Applies in Dating Now most people will go for Venice with the free tour.

However, it provides a term of comparison for Venice with a free city tour. This third option seems the least attractive and nobody will pick it. Imagine you are undecided between a holiday in Venice and Florence.īoth packages come with a free tour, how could you sway the decision? You could add a third package for Venice with a paid city tour.

It seems expensive and when we see that at the same price we can also get Internet access, for free (!), the print-and-Internet seems immediately more attractive by comparison. The second print-only option makes no sense when we see the third one, so 84% picked the third one.īut when the students were presented with two options only 68% chose the cheaper Internet-only subscription: He asked his MBA students to pick among the different options presented, which were: Chapter 1: The Truth About Relativityĭan Ariely says we don’t really comprehend the world around us in absolute terms, but we make sense of it via comparisons.įor example the author ran an experiment with The Economist newspaper. Today he teaches psychology and behavioral psychology at Duke University. We are very likely to cheat when we have the chance and when we can easily rationalizeĪbout The Author: Dan Ariely started out studying physics and mathematics and only later transferred to psychology.Rationality goes out the window when emotional or aroused.We have no idea of intrinsic values: we only assess it by comparison.Chapter 12: The Context of Our Character, Part II.Chapter 11: The Context of Our Character, Part I.Chapter 6: Procrastination and Self-Control.Chapter 2: The Fallacy of Supply and Demand.

Predictably irrational book