Rational irrationality

Have you ever run into those Hare Krishna people on the street in Byron Bay handing out “free” books? And as soon as you take one they ask for a “donation”. And you know how it makes you feel all awkward and uncomfortable because you want to say “no”, but they just gave you this book for free and you don’t want to be an asshole?

Yeah, that’s on purpose.

It turns out that people’s decision making can be easily manipulated in a variety of ways, one of which is by giving someone a “gift” before asking for a favor in return.

Try this next time you want to jump the queue. Ask someone if you can cut in, and give a reason — any reason. Just say, “I’m in a hurry,” or “I’m sick,” and it turns out (according to research) that you’re 80% more likely to be allowed to cut in line than if you just ask without giving any explanation at all. Does your explanation have to make sense? Heck no! As long as you can make something up, you’re good.

Behavioral economists have shown that you can easily be “persuaded” into favoring one price over another for no rational reason. It’s called The Decoy Effect. On the left, the price difference seems large and unreasonable. But add a $50 option and suddenly, the $30 option appears totally reasonable.

Oftentimes when we think we’re behaving rationally, we really aren’t. For example, paying $4.00 for a bottle of water doesn’t make sense when there’s free water in every tap and restaurant. Paying $380 for a pair of Diesel jeans doesn’t make sense when you can buy a decent pair of Levis across the road for $80.

Perhaps you’re thinking, “Well, I actually wouldn’t spend $380 on a pair of jeans. Or $4 on a bottle of water. Or accept the “free” book”. Ok fine.

So what brand of watch is attached to your wrist, and how much did you pay for it? Because my friend’s got a pretty decent watch that tells him the time AND the date, is waterproof, and it cost him $25. What brand of car drives you to work in the morning, and how much did you pay for it? Because my daughter drives a really reliable and safe car, and it cost her less than $16,000.

And what did you pay for the last bottle of wine you took to a restaurant? Because I’m betting it was more than ten bucks, and if so I’m wondering why. Because a $4.99 bottle of the Aldi 2015 South Point rose won a gold medal at the 2016 Sydney International Wine Competition – out-performing wines that cost ten times as much. In fact 65% of the winning wines cost under $30.

Go figure.


Richard Sauerman
Richard Sauerman
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