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

The groundbreaking bestseller from iconic behavioral psychologist Dan Ariely, now the inspiration for the Fall 2023 NBC show The Irrational

"A marvelous book that is both thought provoking and highly entertaining, ranging from the power of placebos to the pleasures of Pepsi. Ariely unmasks the subtle but powerful tricks that our minds play on us, and shows us how we can prevent being fooled." -- Jerome Groopman, New York Times bestselling author of How Doctors Think

"Ariely is a genius at understanding human behavior: no economist does a better job of uncovering and explaining the hidden reasons for the weird ways we act, in the marketplace and out. Predictably Irrational will reshape the way you see the world, and yourself, for good." -- James Surowiecki, author of The Wisdom of Crowds

Why do our headaches persist after we take a one-cent aspirin but disappear when we take a fifty-cent aspirin? Why do we splurge on a lavish meal but cut coupons to save twenty-five cents on a can of soup?

When it comes to making decisions in our lives, we think we're making smart, rational choices. But are we? In this revised and expanded edition of the groundbreaking New York Times bestseller, Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. From drinking coffee to losing weight, from buying a car to choosing a romantic partner, we consistently overpay, underestimate, and procrastinate. Yet these misguided behaviors are neither random nor senseless. They're systematic and predictable--making us predictably irrational.

ISBN-13: 9780061353246

Media Type: Paperback

Publisher: HarperCollins Publishers

Publication Date: 04-27-2010

Pages: 384

Product Dimensions: 5.20(w) x 7.90(h) x 1.00(d)

Dan Ariely is the bestselling author of Predictably Irrational, The Upside of Irrationality, and The (Honest) Truth About Dishonesty. He is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and is the founder of the Center for Advanced Hindsight. His work has been featured in the New York Times, the Wall Street Journal, the Washington Post, the Boston Globe, and elsewhere. He lives in North Carolina with his family.

Read an Excerpt

Predictably Irrational
The Hidden Forces That Shape Our Decisions

Chapter One

The Truth about Relativity

Why Everything Is Relative—Even When It Shouldn't Be

One day while browsing the World Wide Web (obviously for work—not just wasting time), I stumbled on the following ad, on the Web site of a magazine, the Economist.

I read these offers one at a time. The first offer—the Internet subscription for $59—seemed reasonable. The second option—the $125 print subscription—seemed a bit expensive, but still reasonable.

But then I read the third option: a print and Internet subscription for $125. I read it twice before my eye ran back to the previous options. Who would want to buy the print option alone, I wondered, when both the Internet and the print subscriptions were offered for the same price? Now, the print-only option may have been a typographical error, but I suspect that the clever people at the Economist's London offices (and they are clever—and quite mischievous in a British sort of way) were actually manipulating me. I am pretty certain that they wanted me to skip the Internet-only option (which they assumed would be my choice, since I was reading the advertisement on the Web) and jump to the more expensive option: Internet and print.

But how could they manipulate me? I suspect it's because the Economist's marketing wizards (and I could just picture them in their school ties and blazers) knew something important about human behavior: humans rarely choose things in absolute terms. We don't have an internal value meter that tells us howmuch things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. (For instance, we don't know how much a six-cylinder car is worth, but we can assume it's more expensive than the four-cylinder model.)

In the case of the Economist, I may not have known whether the Internet-only subscription at $59 was a better deal than the print-only option at $125. But I certainly knew that the print-and-Internet option for $125 was better than the print-only option at $125. In fact, you could reasonably deduce that in the combination package, the Internet subscription is free! "It's a bloody steal—go for it, governor!" I could almost hear them shout from the riverbanks of the Thames. And I have to admit, if I had been inclined to subscribe I probably would have taken the package deal myself. (Later, when I tested the offer on a large number of participants, the vast majority preferred the Internet-and-print deal.)

So what was going on here? Let me start with a fundamental observation: most people don't know what they want unless they see it in context. We don't know what kind of racing bike we want—until we see a champ in the Tour de France ratcheting the gears on a particular model. We don't know what kind of speaker system we like—until we hear a set of speakers that sounds better than the previous one. We don't even know what we want to do with our lives—until we find a relative or a friend who is doing just what we think we should be doing. Everything is relative, and that's the point. Like an airplane pilot landing in the dark, we want runway lights on either side of us, guiding us to the place where we can touch down our wheels.

In the case of the Economist, the decision between the Internet-only and print-only options would take a bit of thinking. Thinking is difficult and sometimes unpleasant. So the Economist's marketers offered us a no-brainer: relative to the print-only option, the print-and-Internet option looks clearly superior.

The geniuses at the Economist aren't the only ones who understand the importance of relativity. Take Sam, the television salesman. He plays the same general type of trick on us when he decides which televisions to put together on display:

36-inch Panasonic for $690
42-inch Toshiba for $850
50-inch Philips for $1,480

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Table of Contents

Introduction: How an Injury Led Me to Irrationality and to the Research Described Here xi

Chapter 1 The Truth about Relativity: Why Everything Is Relative—Even When It Shouldn't Be 1

Chapter 2 The Fallacy of Supply and Demand: Why the Price of Pearls—and Everything Else—Is Up in the Air 25

Chapter 3 The Cost of Zero Cost: Why We Often Pay Too Much When We Pay Nothing 55

Chapter 4 The Cost of Social Norms: Why We Are Happy to Do Things, but Not When We Are Paid to Do Them 75

Chapter 5 The Power of a Free Cookie: How free Can Make Us Less Selfish 103

Chapter 6 The Influence of Arousal: Why Hot Is Much Hotter Than We Realize 119

Chapter 7 The Problem of Procrastination and Self-Control: Why We Can't Make Ourselves Do What We Want to Do 139

Chapter 8 The High Price of Ownership: Why We Overvalue What We Have 167

Chapter 9 Keeping Doors Open: Why Options Distract Us from Our Main Objective 183

Chapter 10 The Effect of Expectations: Why the Mind Gets What It Expects 199

Chapter 11 The Power of Price: Why a 50-Cent Aspirin Can Do What a Penny Aspirin Can't 225

Chapter 12 The Cycle of Distrust: Why We Don't Believe What Marketers Tell Us 251

Chapter 13 The Context of Our Character, Part I: Why We Are Dishonest, and What We Can Do about It 271

Chapter 14 The Context of Our Character, Part II: Why Dealing with Cash Makes Us More Honest 295

Chapter 15 Beer and Free Lunches: What Is Behavioral Economics, and Where Are the Free Lunches? 309

Thanks 323

List of Collaborators 327

Notes 335

Bibliography and Additional Readings 339