Our irrational behaviors are neither random nor senseless – they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.
Here are five ways we most irrationally think:
- The Cost of Zero Cost – People are attracted when there is a free item. We purchase an extra canned good because it has a free toothbrush. Feeling we are smart shoppers without estimating that the free item doesn’t cost as much as the increased price of the product.
- The Cost of Social Norms – Do not mix business with pleasure. People get caught off guard when a friend asks for a favor related to your career. We cannot simply give them our “hourly” price or how much is our worth because we will feel ridiculous.
- The Effect of Expectations – I have this favorite restaurant in Cebu that I dine every Sunday (feast day). This expectation of the best-selling food (which is also my favorite) only to found out the meat is too soft or too hard. That’s what you call, do not try the same restaurant over and over again and… try other meals.
- The Power of Price – A supermarket brand mineral water is the same as the branded mineral water – the difference, brand name but with the same packaging. We are blinded that we are doing a better decision choosing the branded over the cheaper ones, when in fact it’s the same.
- The Cycle of Distrust – Educational plans. Insurance. Name it. Whatever business we encounter, monkey business doesn’t seem to diminish. Because of the past business transactions we make, the skepticism of the person arises results a slow progressing economy.
Conducted with a lot of experiments and written wittingly is a must read for the ones who is interested in behavioral economics. The outside forces that influenced us are now rewired to be rational.