Predictably Irrational Revised and Extended Edition Released!
Yeah we are
Finally. I’ve been holding back on buying the first edition for the revised one to come out since a friend recommended it to me.
Predictably Irrational by Dan Ariely
The subject of the book is behavioral economics, the irrational decisions we as humans make in life. More specifically, when it come to money decisions. This is a (I would hope) growing career especially since the economic collapse and everyone who is interested in either business or psychology should read up on some concepts developed by this field. The best way to show you how great this field is, is with an example.
MIT Economist Subscription Pricing Study
So back in the day, Dan Ariely noticed something weird about economist.com subscription options.
Web only – $59
Print only – $125
Web + Print – $125
Well well. A regular pricing model would have continuous price increases as value offered increases but here we have web+print for the same price as print only. He decided to run a survey at MIT (where he teaches).
He sampled 100 students and presented them with those three options. 16 chose web only, 84 web + print, and unsurprisingly, none chose print only. Since nobody chooses the print only option, it really has to place in their pricing chart right? So he took out the print only option and gave the survey with only those two options. Results:
Mind Blown
I’ll give you a minute to let that seep in. The number of print + web subscriptions dropped from 84% to 32% (which would be a loss of $3000). How could removing an option, that no one chose when available, have such a dramatic effect on a buyer’s decision? The answer, human’s are irrational. Having the print only option sets a reference value point which establishes the worth of the print only option. Without the reference, customer’s do not have that value established and find that the web only option is a better decision.
I’m sure he explains it more clearly and with more detail in his book, which is chock full of such research studies. Adding this book to my slowly growing library. Read it.