Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

The book allowed me to review choices and decision-making process and the snap-judgment that I’ve used to evaluate options and choices. Part of that I was taught in school and economic class. I had to remove that, and this book helped me to actually remove that strict guideline of economics, and remove it from my decision-making process, opening up the circle of choices and truly evaluating the situation from a non-emotional perspective.

PFS Book Club --- 3rd MArch 2024 Today we reviewed book called “Predictably Irrational” by Dan Ariely. This interesting book was reviewed over two Saturdays and talk about how we make irrational decisions in different situations. Kruthika started the discussion with an anecdote of buying something when relative prices are given. He emphasized that our brains are wired to compare things We are able to make judgements by comparing prices of one thing with that of other. He also talked about decoy effect which, means when third option is presented, we change our preferences. He gave example of hotel at one place in Rome and other at Paris with third option of hotel with breakfast in Paris, people will prefer with breakfast as third option makes it easier to narrow the choice. KK also spoke about demand and supply; we make decisions based on our first impressions. Relationship between supply and demand are based on memory rather than preferences. Price anchors are drivers of demand and they get established in an un-intuitive manner and once they are imprinted, its very hard to shake them. KK also explained that how cost of zero causes people to react irrationally. When something free is set as cost then people take things that they don’t need and leave other better delas as they feel that free comes at no cost. For example, if you are given a choice to have 500 rs free voucher or to buy a 1000 rs voucher at 200 rs, you will go with free 500 rs voucher though other deal is much better. KK also explained that how work done as a favor produce better results than work paid for. People work for cause more than money, he gave example of how lawyers were asked to reduce their fees for societal cause and rather than reducing money, they worked for free which gave more reason for others to believe in them. People tend to value things more that they own that they are worth to them or others. This is because we suffer from loss aversion. Dheer explained this as sunk cost fallacy also called endowment effect. KK talked about placebo effect by giving example that patients experience relief after having medicines which are expensive When things are sold cheap or are discounted, it does not mean that they are cheap or bad quality. In last KK explained about cheating. He says it is easier to cheat when cash is not involved. He gave some examples of exaggerated insurance claims, returning worn items of clothing as cheating and said that people act more honest when non, monetary items are labelled with price. Chandrashekar gave example of restaurant in Singapore where they tell customers that they can walk away without paying anything and average customer pay is 15 dollars whereas cost is 7-8 dollars. Yet another amazing session😊