Dan Ariely is a behavioral economist who studies how human psychology impacts consumer behavior. His research shows that standard economic theories that assume rational decision making do not always apply, as psychological factors like biases and framing effects influence choices. Specifically, Ariely has found that: 1) People overvalue free or low cost items and options compared to higher priced alternatives, even if the higher priced option would save them more money in the long run. 2) Anchoring effects cause our first impressions of products to strongly shape our later opinions, even if initial information is irrelevant. 3) Social norms are powerful motivators that are often more effective and cheaper than financial incentives alone.

1. AN OVERVIEW OF DAN
ARIELY’S RESEARCH ON
CONSUMER BEHAVIOR
AND HUMAN
PSYCHOLOGY
Presented by
Ethan Melvin
Intern
1

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
3

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
6

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?
10

11. Thank You!
Questions?
11