Behavioral Economics

1. AN OVERVIEW OF DAN
ARIELY’S RESEARCH ON
CONSUMER BEHAVIOR
AND HUMAN
PSYCHOLOGY
Presented by
Ethan Melvin
Intern
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2. Dan and
his book
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3. Standard
Economics
Vs.
Behavioral
Economics
• Standard economics assumes humans are rational and
correctly update their opinions based on new
information that is received.
• Behavioral economics focuses on understanding
common decision mistakes that people make and why
they make them and also acknowledges that the
context in which a decision is made has an significant
impact on the decision.
• Daniel Kahneman points out that psychological
phenomena such as biases, heuristics, and framing
effects need to be a part of each of the models
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4. The Cost of
Zero Cost:
The Price of
Free
4

5. Emotion
Was
Highest
When Free
Was
Mentioned
5
Cox “Bird Brain”

6. Anchoring
and our
First
Impression
of Products
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7. The Cost of
Social
Norms
(1 of 2)
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8. The Cost of
Social
Norms
(2 of 2)
• ”Money , as it turns out, is very often the
most expensive way to motivate people.
Social norms are not only cheaper, but often
more effective as well.”
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9. The Cycle of
Distrust: Why
we don’t
believe what
marketers tell
us (1 of 2)
• “An unambiguous statement, apart from a
brand, is believable.When a brand gets
involved, we start to question the validly of
the statement.”
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10. The Cycle of
Distrust: Why
we don’t
believe what
marketers tell
us (2 of 2)
• Trust, once eroded, is very hard to restore
• So how can we recover from distrust?
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11. Thank You!
Questions?
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