Predictably Irrational

 

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usa $25.95 canada $27.95 · w h y do our headaches persist after taking a one-cent aspirin but disappear when we take a 50-cent aspirin · why does recalling the ten commandments reduce our tendency to lie even when we couldn t possibly be caught · w h y do we splurge on a lavish meal but cut coupons to save 25 cents on a can of soup · w h y do we go back for second helpings at the unlimited buffet even when our stomachs are already full · and how did we ever start spending $4.15 on a cup of coffee when just a few years ago we used to pay less than 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

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dan ariely is the alfred p sloan professor o f behavioral economics at m i t where he holds a joint appointment between m i t s media laboratory and the sloan school of management he is also a researcher at the federal reserve bank of boston and a visiting professor at duke university ariely wrote this book while he was a fellow at the institute for advance study at princeton his work has been featured in leading scholarly journals and a variety of popular media outlets including the new york times the wall street journal globe scientific the washington and science post the boston american ariely has appeared on c n n and national public radio he divides his time between durham north carolina cambridge massachusetts and the rest o f the world www.predictablyirrational.com authorphotograph design courtesy of theauthorvan bree jacket by christine visit www.authortracker.com for exclusive information on your favorite harpercollins authors harper an imprint ofwzr^erqowxnspublishers www.harpercollins.com

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predictably irrational it s not what you think a marvelous book that is both thought-provoking and highly entertaining ranging from the power o f placebos to the pleasures o f pepsi ariely unmasks the subtle but powerful tricks that our minds play on us and shows us how we can prevent being fooled jerome groopman recanati chair of medicine harvard medical school and new york times bestselling author o f how doctors think d a n ariely is a genius at understanding human behavior no economist does a better job of uncovering and explaining the hidden reasons for the weird ways we act in the marketplace and out predictably irrational will reshape the way you see the world and of crowds yourself for good james surowiecki author o f the wisdom filled with clever experiments engaging ideas and delightful anecdotes d a n ariely is a wise and amusing guide to the foibles errors and bloopers o f everyday decision making danielgilbert professor o f psychology harvard university and new york times bestselling author o f stumbling on happiness this is going to be the most influential talked-about book in years it is so full o f daz zling insights and so engaging that once i started reading i couldn t put it down danielmcfadden 2 0 0 0 nobel laureate in economics morriscox professor ofeconomics university ofcalifornia at berkeley predictably irrational is wildly original it shows why much more often than we usu ally care to admit humans make foolish and sometimes disastrous mistakes ariely not only gives us a great read he also makes us much wiser george akerlof 2 0 0 1 nobel laureate in economics koshland professor ofeconomics university ofcalifornia at berkeley t h e most difficult part o f investing is managing your emotions d a n explains why that is so challenging for all o f us and how recognizing your built-in biases can help you avoid common mistakes charles schwab chairman and c e o t h e charles schwabcorporation

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predictably irrational

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predictably irrational the hidden forces our decisions that shape dan ariely harper an imprint ofharpercominspublishers www.harpercollins.com

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predictably irrational copyright © 2 0 0 8 by dan ariely all rights reserved printed in the united states of america n o part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews for information address harpercollins publishers 10 east 53rd street new york n y 1 0 0 2 2 harpercollins books may be purchased for educational business or sales promotional use for information please write special markets department harpercollins publishers 10 east 53rd street new york n y 10022 designed by renato stanisic library of congress cataloging-in-publication data is available upon request isbn 9 7 8 0 0 6 1 3 5 3 2 3 9 08 09 10 11 12 wbc/rrd 10 9 8 7 6

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to my mentors colleagues who make research and students exciting

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contents introduction how an injury led me to irrationality research described xi chapter i and to the here the truth about relativity why everything is relative even when it shouldn t be 1 chapter 2 the fallacy of supply and demand why the price of pearls and 23 chapter 3 everything else is up in the air the cost of zero cost why we often pay too much when we pay nothing 49

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contents chapter 4 the cost of social norms why we are happy to do things but not them 67 chapter 5 when we are paid to do the influence of arousal why hot is much hotter 89 chapter 6 than we realize the problem of procrastination and self-control why we can t make ourselves what we want to do 109 chapter 7 do the high price of ownership why we overvalue 127 chapter 8 what we have keeping doors open why options distract us from our main objective 139 chapter 9 the effect of expectations why the mind gets what it 155 expects viii

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contents chapter io the power of price why a so-cent aspirin can do what a penny aspirin 173 chapter i i can t the context of our character part i why we are dishonest 195 chapter 12 and what we can do about it the context of our character part ii why dealing with cash makes 217 chapter 13 us more honest beer and free lunches what is behavioral economics 231 and where are the free lunches thanks 245 list of collaborators 249 notes 255 bibliography and additional readings 259 index 269 ix

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introduction how an injury led me to irrationality to the research described here and i have been told by many people that i have an unusual way of looking at the world over the last 20 years or so of my research career it s enabled me to have a lot of fun figuring out what really influences our decisions in daily life as opposed to what we think often with great confidence influences them do you know why we so often promise ourselves to diet only to have the thought vanish when the dessert cart rolls by do you know why we sometimes find ourselves excitedly buying things we don t really need do you know why we still have a headache after taking a one-cent aspirin but why that same headache vanishes when the aspirin costs 50 cents do you know why people who have been asked to recall the ten commandments tend to be more honest at least im mediately afterward than those who haven t or why honor codes actually do reduce dishonesty in the workplace?

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