...Léo Greiner & Mark Michaels Morty Yalovsky BUSA 100 11/04/15 Book Report 2 The novel Predictably Irrational, by author Dan Ariely, claims and supports the notion that consumers make economic decisions through emotions and instinct in preference to logical deduction. The book features fourteen chapters, each one exploring a manner in which humans act irrationally in the economic world. For example, chapter 3 delves into the “zero price effect”. Ariely argues that for transactions where both products in question have monetary cost, humans will proceed logically to determine which product outweighs the other. On the other hand, if the product were to become free, the human brain no longer evaluates the pros and cons, but instead immediately...
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...Matthew Ellis Marketing Management Prof Pashkevich December 4, 2013 In the book predictably irrational, author Dan Ariely explains and demonstrates through witty experiments the fact that although we may think we are always making rational, well thought out decisions, there are actually hidden factors that cloud our ability to make the right decisions. He goes on to discuss how our emotions, social norms, and other hidden forces can change our rational intentions into extremely irrational Behaviors. The interesting part is that these irrational behaviors seem like the correct thing to do at the time and we use these past experiences to make future decisions, and therefore if we are not very careful we can fall into a never ending train of irrational decisions. Dan Ariely makes it quite apparent that this behavior takes place in everyday life even though we may not know it and hopes that his research can open our eyes to this fact and help us to avoid making irrational choices. He challenges the traditional assumption that the economic man uses rational thought to make decisions and challenges his readers to rethink the way they view the simple, everyday choices made on a daily basis. After reading the book, he makes it obvious that we all unknowingly act predictably irrational, however he gives us the tools to overcome this and think and behave in a rational manner. Some of the major points discussed in the book include the truth about making decisions based on comparisons...
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...Dan Ariely’s nonfiction book Predictably Irrational provides an exciting perspective on the field of behavioural economics. Ariely presents his own theories and research on various aspects of human behaviour. He explains the fundamental differences between traditional economics and behavioural economics in a way that is easy to understand. Traditional economics assumes that people are rational, whereas behavioural economics stresses that they are irrational. Ariely’s primary focus in the work is this debate between rationality and irrationality. The entire book is written in the first person using an informal tone. The casual tone can be justified as the book is aimed at the general public, as opposed to other researchers and academics. However, given the scientific nature of the information he is presenting, the informal tone also causes his findings to lack assertiveness. Keeping in theme with the informal tone, Ariely uses many anecdotes to convey his findings in a way that is relevant to, and can be understood by, the reader. The anecdotes help the reader grasp the concepts with greater ease, but the addition of personal stories further detracts from the assertiveness of his research. At the risk of losing some readers, it would have been preferred for Ariely to use a more formal approach to match the serious content of his work. Clearly, Ariely aimed to reach a broader range of readers who would not normally study behavioural economics. The book is geared mainly at an...
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...Adam Smith wrote the Wealth of Nations in 1776 which reflected on the economics at the end of the 18th century and it presented the argument as to why a free market economy is so beneficial. Smith's theory of the invisible hand was used as a metaphor for self interest which was a key focus in the work of writing. Smith felt that when people tried to maximize their personal gains in a free market they would also be benefiting the economy more so than if they were to act for the good of others. "By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such manner as its produce may be of the greatest value, he intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention...by pursing his own interests he frequently promotes that of society more effectually than when he really intends to promote it.”1 With faith put in the driving force of self interest via the invisible hand theory it has been depicted by many economists to be the best way to steady an economy under laissez-faire conditions. Other than a brief showing in the later party of the 18th century the invisible hand theory made its presenc felt during the Industrial Revolution when many economists argued for the invisible hand which was very appropriate for the development of society at that time. However, recently, the theory invisible hand theory no longer leads to economic...
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...human behavior but tries to dictate human behavior. Behavioral Economics The authors draw their arguments from two perspectives: descriptive and proscriptive perspectives. Descriptive explains human behavior and proscriptive tries to denounce human behavior. These two depend on two things: human psychology and one’s rationality. The decisions made by a human being are based on the perception of the situation and the individuals’ reasoning. Reasoning involves various cognitive capabilities. Hence, decision made by humans cannot be attributed to full rationality. The rationality bounds do not contribute wholly to decision making. Moreover, lacking complete control by humans on their behaviour is as a result of cognitive behavior bounds (Ariely, 2008) One who makes decisions based on aspiration and not utility maximization stands to be rational. Subjective utility maximization that has been adjusted by cognitive constraint do not describe bounded rational making of decisions. The authors also base their arguments on perception, motivation and cognitive activities of beings. This explains for the disciplines that make up behavioral economics. Economics evolved like other revolutions beginning with strange facts,...
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...Wiki Loves Monuments: Photograph a monument, help Wikipedia and win! Production theory From Wikipedia, the free encyclopedia Jump to: navigation, search Production theory is the study of production, or the economic process of converting inputs into outputs. Production uses resources to create a good or service that is suitable for use, gift-giving in a gift economy, or exchange in a market economy. This can include manufacturing, storing, shipping, and packaging. Some economists define production broadly as all economic activity other than consumption. They see every commercial activity other than the final purchase as some form of production. Production is a process, and as such it occurs through time and space. Because it is a flow concept, production is measured as a “rate of output per period of time”. There are three aspects to production processes: 1. the quantity of the good or service produced, 2. the form of the good or service created, 3. The temporal and spatial distribution of the good or service produced. A production process can be defined as any activity that increases the similarity between the pattern of demand for goods and services, and the quantity, form, shape, size, length and distribution of these goods and services available to the market place. Contents * 1 Neoclassical Theory of Production * 1.1 Factors of production * 1.2 Total, average, and marginal product * 1.3 Diminishing returns * 1.4 Diminishing marginal returns...
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...1. Source: book, Predictably Irrational, by Dan Ariely: pp. 4. Passage: “One thing Rapp has learned is that high-priced entrees on the menu boost revenue for the restaurant－even if no one buys them. Why? Because even though people generally won’t buy the most expensive dish on the menu, they will order the second most expensive dish. Thus, by creating an expensive dish, a restaurateur can lure customers into ordering the second most expensive choice (which can be cleverly engineered to deliver a higher profit margin).” What works: First describe a seemingly self-contradictory phenomenon to arouse interest. Then, by asking “Why?” for the reader, the author naturally gives out the reason that resolves the puzzle. Using it: I can use rhetoric questions to let readers think for themselves first, and then offer my own reason. 2. Source: book, Predictably Irrational, by Dan Ariely: pp. 17. Passage: “The result? Now the average CEO makes about 369 times as much as the average worker－about three times the salary before executive compensation went public.” What works: Using a precise number “369 times” to make a dramatic effect on the polarity of income. The number is really eye-catching, and straightly conveys a sense of sarcasm. Using it: If I want to show the scale of something, I can use exact numbers to impress the reader. 3. Source: A little faster, George? From The Economist, March 9th 2013: pp. 11. Passage: “Over the past 170 years this newspaper has tracked...
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...a dollar? hen it comes to making decisions in our lives, we think we're in control. We think we're making smart, rational choices. But are we? In a series o f illuminating, often surprising experi ments, M I T behavioral economist Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. Blending everyday experience with ground breaking research, Ariely explains how expectations, emotions, social norms, and other invisible, seemingly illogical forces skew our reasoning abilities. N o t only do we make astonishingly simple mistakes every day, but we make the same types of mistakes, Ariely discovers. We consistently overpay, underestimate, and procrastinate. We fail to understand the profound effects of our emotions on what we want, and we overvalue what we already own. Yet these misguided behaviors are neither random nor senseless. They're systematic and predict able—making us predictably irrational. From drinking coffee to losing weight, from buying a car to choosing a romantic partner, Ariely explains how to break through these systematic patterns o f thought to make better decisions. Predictably Irrational will change the way we interact with the world—one small decision at a time. 0208 DAN ARIELY is the Alfred P. Sloan Professor o f Behavioral E c o n o m i...
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...Smartphones and Social Networking David B. Henson ISSC340 Professor Jeffrey Miller American Military University July 2014 The technologies used in making today’s Smartphones and the way they communicate play a crucial role in changing the way we as humans interact with each other. Just a few decades ago there were no smartphones. People interacted with one another via face-to-face conversations. There were no apps to check in to someplace, to text someone, or a way to update your status on your favorite social networking site. People got together in groups and had verbal face-to-face conversations, interaction, hugging, handshaking, smiles, frowns and many more reactions to one another. Today, people have those same reactions but, with digital friends they may have never met. You may hear people say they have a few hundred Facebook friends, Twitter followers, or Youtube views of videos they put online. Is interacting with digital friends online considered human interaction? Where does this interaction take place? When you sit behind a computer screen, a tablet, or your Smartphone and update your status or read someone’s updates is it considered human interaction? This author thinks it is not. SMARTPHONE AND NETWORK TECHNOLOGY The first mobile phone call was made in 1973. Martin Cooper, a Motorola engineer called his competitor at AT&T. Although, it took some time after that first mobile call; almost every person has a Smartphone today. Martin Coopers dream has...
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...THE NEW ECONOMICS in the SPECIAL ISSUE NEW WORLD The End of Rational Economics Your company has been operating on the premise that people – customers, employees, managers – make logical decisions. It’s time to abandon that assumption. | by Dan Ariely IN 2008, a massive earthquake reduced the financial world to rubble. Standing in the smoke and ash, Alan Greenspan, the former chairman of the U.S. Federal Reserve once hailed as “the greatest banker who ever lived,” confessed to Congress that he was “shocked” that the markets did not operate according to his lifelong expectations. He had “made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders.” Jacob Thomas 78 Harvard Business Review | July–August 2009 | hbr.org hbr.org | July–August 2009 | Harvard Business Review 79 THE NEW ECONOMICS in the NEW WORLD. We are now paying a terrible price for our unblinking faith in the power of the invisible hand. We’re painfully blinking awake to the falsity of standard economic theory – that human beings are capable of always making rational decisions and that markets and institutions, in the aggregate, are healthily self-regulating. If assumptions about the way things are supposed to work have failed us in the hyperrational world of IN BRIEF Wall Street, what damage have they done in other institutions » The global economic...
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...An institutional analysis of the beer market | Written by: Frank Bloemhof Student number: 294673 International Business School, Hanze University of Applied Sciences, Groningen Lecturer: Arnd Mehrtens Written by: Frank Bloemhof Student number: 294673 International Business School, Hanze University of Applied Sciences, Groningen Lecturer: Arnd Mehrtens | | | Date: 29 January 2015 Word count: 8,925 Abstract The global beer industry - An Analysis of opportunities and risks in light of its institutional characteristics, as exemplified in part by Heineken. In this report you will read about a novel concept in economics called the Three Pillar Model, with a particular focus on the pillar of entities. After a general introduction, specific information about the beer market will be given. This is followed by a short analysis of the company Heineken NV, a Dutch beer brewer operating in over 170 countries worldwide. To end the report a conclusion will be given. This is followed by, which will include among other things the recommendation to create a strong bond with the consumer. In the very end you will find a list of all the sources that were used to write this report. Contents Abstract 1 Introduction 3 1. Literature review 4 1.1 Three pillar model 4 1.2 Theories 4 1.2.1 Neoclassical economics 5 1.2.2 Institutional economics 6 1.2.3 Behavioural economics 8 1.3 Entities 10 1.3.1 Institutions 10 1.3.2 Organizations 10 1.3.3 Individual...
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...The irrational side of change management 101 Organization Practice The irrational side of change management Most change programs fail, but the odds of success can be greatly improved by taking into account these counterintuitive insights about how employees interpret their environment and choose to act. Carolyn Aiken and Scott Keller In 1996, John Kotter published Leading Change. Considered by many to be the seminal work in the field of change management, Kotter’s research revealed that only 30 percent of change programs succeed. Since the book’s release, literally thousands of books and journal articles have been published on the topic, and courses dedicated to managing change are now part of many major MBA programs. Yet in 2008, a McKinsey survey of 3,199 executives around the world found, as Kotter did, that only one transformation in three succeeds. Other studies over the past ten years reveal remarkably similar results. It seems that, despite prolific output, the field of change management hasn’t led to more successful change programs. It also hasn’t helped that most academics and practitioners now agree on the building blocks for influencing employee attitudes and management behavior. McKinsey’s Emily Lawson and Colin Price provided a holistic perspective in “The psychology of change management,”1 which suggests that four basic conditions are necessary before employees will change their behavior: a) a compelling story, because employees must see the point...
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...(email) 1 MGS 4000 VERSION 1.1 TENTATIVE COURSE SCHEDULE *Note: Schedules may change during the semester. In case of change, students will be notified in advance via email. Please check your email before coming to the class. Assignments Due (All Assignments Due By 2:00 PM) Content Covered In Class Date 8/26 - Read The Syllabus - Course Overview - Introduction to Managerial Decision Making 9/2 - Article: Fox (2015, HBR course pack) - Judgement Heuristics “From Economic Man” to Behavioral - Common Biases I Economics” - Class discussion: Bill’s decision - Article: Hammond et al. (1998, HBR - Class exercise: 10 estimations course pack) “The Hidden Traps of Decision - Video: “Predictably Irrational” Making” - Video: “Basic human motivation”Dan Ariely at TED 9/9 - Article: Bazerman & Chugh (2006, HBR - Common Biases II course pack) “Decisions Without Blinders” • Bounded awareness - Article: Hayashi (HBR course pack) “When • Framing of problems to Trust Your Gut” • Emotional influence on - Assignment 1 due: exercise questionnaire decision making submission • Escalation of commitment Fairness in decision making 9/16 - Assignment 2 due: Buying a House: Initial - Improving decision making Search Results - Stating a dilemma & identifying preferences 9/23 - Assignment 3 due: Buying a House: Identifying Your Preferences - Article: Hammond, et al. (HBR course pack) “Even Swaps”...
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...The halo effect refers to a bias whereby the perception of a positive trait in a person or product positively influences further judgments about traits of that person or products by the same manufacturer. One of the more common halo effects is the judgment that a good looking person is intelligent and amiable. There is also a reverse halo effect whereby perception of a negative or undesirable trait in individuals, brands, or other things influences further negative judgments about the traits of that individual, brand, etc. If a person "looks evil" or "looks guilty" you may judge anything he says or does with suspicion; eventually you may feel confident that you have confirmed your first impression with solid evidence when, in fact, your evidence is completely tainted and conditioned by your first impression. The hope that the halo effect will influence a judge or jury is one reason some criminal lawyers might like their clients to be clean-shaven and dressed neatly when they appear at trial. The phrase was coined by psychologist Edward Thorndike in 1920 to describe the way commanding officers rated their soldiers. He found that officers usually judged their men as being either good or bad "right across the board. There was little mixing of traits; few people were said to be good in one respect but bad in another."* The old saying that first impressions make lasting impressions is at the heart of the halo effect. If a soldier made a good (or bad) first impression on his...
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...HBR CASE STUDY The Customers’ Revenge Atida Motors’ decades-old complaint policy may be no match for unhappy customers who threaten to take their case to YouTube. by Dan Ariely Daniel Vasconcellos J IM MCINTIRE, vice president of customer service at Atida Motor Company, was just about to shut down for the day when he received an e-mail from his brother. “Go to Hell, Angel!” the subject line shouted. The message linked to a YouTube video. In “A Letter for Bill Watkins, CEO, Angel Airlines,” two stolid executives – “Jeff” and “Jerry” – wearing identical pinstripe suits, took turns narrating the story of their airline nightmare. In one scene, the pair sat chained to their coach seats in a stuffy, tarmac-stranded plane. Sweating women and children in prison garb begged for water from surly flight attendants dressed as guards. In the next, the two men crawled on their knees before a leather-clad gate attendant, crowned with devil horns and holding a long whip. They begged her to finally assign them their “guaranteed” seats HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts. hbr.org 1717 Ariely_REV_LAYOUT.indd 31 | December 2007 | Harvard Business Review 31 11/1/07 7:53:09 PM HBR CASE STUDY | The Customers’ Revenge on an overbooked plane. “Not a chance,” she replied huffily. She snapped her whip dismissively and shouted, “Next in line!” In the final sequence...
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