This document provides summaries of chapters from the book "Predictably Irrational" by Dan Ariely. The chapters discuss various cognitive biases and irrational behaviors that influence human decision-making. Some of the biases explored include anchoring effects, the irrational excitement of free options, how arousal and emotions can override rational thinking, and how social and market norms differently impact our choices. The document also examines how expectations, prices, and honesty are context-dependent and can be manipulated in systematic ways.

1. PREDICTABLY
IRRATIONAL
Dan Ariely

2. THE TRUTH ABOUT
RELATIVITY 01 Why everything is relative – even when it
shouldn’t be
• Most people don’t know what they want until
they see it in context
• We only compare things that are easily
comparable
• Often a decoy is employed, tricking people
into the ‘easy’ choice

3. THE FALLACY OF
SUPPLY AND
DEMAND 02 Why the price of pearls - and everything else -
is up in the air
• Our first impressions (of price/product) are
imprinted in our minds and become an
anchor
• This anchor affects future decisions about
what we are willing to pay
• ‘Arbitrary coherence’ decrees that although
initial prices can be "arbitrary," once those
prices are established in our minds, they will
shape not only present prices but also future
ones (thus making them "coherent")

4. THE COST OF ZERO 03 Why we often pay too much when we pay
nothing
• Zero is a source of irrational excitement
• Most transactions have an up side and a
down side, when something is free we forget
the downside
• Think quickly: Would you pick a $10 voucher
for free or a $20 voucher for $7. Most people
opt for the free voucher rather than the
voucher that would give them 3 extra dollars

5. THE COST OF
SOCIAL NORMS 04 Why we are happy to do things, but not when
we are paid to do them
• Social norms e.g. Opening a door for
someone or helping a friend move house vs
Market norms - payments
• Lawyers asked to work for $30 an hour for
needy retirees refused, comparing the $30 to
their market salary. However, they were
willing to offer their services for free
• When on a date, never mention the price of
the food; even though it is explicitly printed

6. THE INFLUENCE OF
AROUSAL 05 Why hot is much hotter than we realise
• Men were sought out and asked questions
about sexual and moral decisions, these
questions were then asked to them again in
a high state of arousal
• The magnitude of underprediction by the
participants was substantial, we are unable
to predict the ways in which our emotions
can take control of our behaviour
• It is this concept of having two sides to
ourselves that inspired Dr Jekyll and Mr
Hyde

7. THE PROBLEM OF
PROCRASTINATION
AND SELF-CONTROL 06 Why we can’t make ourselves do what we want
to do
• Americans are not only not saving but are
spending more than they earn, the average
American family now has six credit cards
• As with losing weight, we lose the battle to
save, procrastinating instead
• Students who were allowed to set their own
deadlines for submitting coursework tended
to do better when they spaced the timings,
realising their tendency to procrastinate

8. THE HIGH PRICE OF
OWNERSHIP 07 Why we overvalue what we have
• Much of our life story can be told by
describing the ebb and flow of our particular
possessions
• We fall in love with what we already have,
we focus on what we may lose and we
assume other people will see the transaction
from the same perspective as we do
• Another peculiarity is that we begin to feel
ownership even before we own something
e.g. eBay

9. KEEPING DOORS
OPEN 08 Why options distract us from our main objective
• We cannot stand the idea of closing doors
on our alternatives
• In each case we give something up for the
sake of having these options
• Given a simple set up and clear goal, all of
us are quite adept at pursuing the source of
our satisfaction

10. THE EFFECT OF
EXPECTATIONS 09 Why the mind gets what it expects
• When we believe beforehand that something
will be good, generally it will be good - and
when we think it will be bad, it will be bad
• To look at whether these influences just
change our beliefs or our physiology as well,
Ariely brewed two beers, one with vinegar,
one without.
• The students who were told about the
vinegar after drinking the beer liked it a lot
more than those told first, just as much as
those who were not told at all

11. THE POWER OF
PRICE 10 Why a 50-cent aspirin can do what a penny
aspirin can’t
• In general, two mechanisms shape the
expectations that make placebos work; belief
and conditioning e.g. Pavlov’s dogs
• On the basis of price alone it is easy to
imagine that a $4000 couch will be more
comfortable than a $400 couch
• Marketers rely on perceived value but this
can become real value if the customer is
getting more satisfaction from the promoted
product

12. THE CONTEXT OF
OUR CHARACTER,
PART I 11 Why we are dishonest, and what we can do
about it
• Decisions about honesty and dishonesty
relate to the size of the transgression
• People cheat when they have the chance to
do so but they don’t cheat as much as they
could
• Once they begin thinking about honesty they
stop cheating completely

13. THE CONTEXT OF
OUR CHARACTER,
PART II 12 Why dealing with cash makes us more honest
• Cheating is a lot easier when it's a step
removed from money
• Stealing a Coke vs stealing 1 dollar
• What do we do now that cash is
disappearing?

14. BEER AND FREE
LUNCHES 13 What is behavioural economics, and where are
the free lunches?
• When people in a bar or restaurant order out
loud in sequence, they choose differently
from what they order in private, opting for
variety and are generally less happy with
their choice
• The first person to order in the sequential
group was the happiest in the group
• Standard economics assumes that we are
rational; making logical, sensible decisions.
In fact we are far less rational and our
irrational behaviours are systematic and
predictable