The key ideas

Predictably Irrational: The Hidden Forces That Shape Our Decisions

Dan Ariely, 2008

An extra subscription option that nobody chooses changes the majority’s choice. A random number influences how much people are willing to pay for wine. Through experiments, Dan Ariely shows that mistakes in our decisions often follow recurring patterns. This retelling also examines which experiments later held up under scrutiny and which did not.

Who it is for

For anyone who has bought something unnecessary and later wondered how it happened, and anyone who wants to notice what influences their decisions.

We are far less rational than economic theory assumes. But our irrational behavior is not random: it is systematic and predictable.

What the book is about

You go in for one thing and come out with three. All the while, you confidently explain to yourself why each was necessary. Why does this happen?

Psychologist Dan Ariely answers through experiments. His field is behavioral economics, which studies how people actually make decisions. He believes our mistakes often follow recurring patterns. This makes them largely predictable and something we can learn to notice.

Ahead are a magazine subscription nobody buys but which still drives sales, a zero-cent chocolate, and a sugar pill that participants said helped more when they believed it was expensive. One qualification first: some of Ariely’s studies were later tested again, and not all their conclusions held up. We will discuss that too.

Idea 1. The option nobody chooses

Ariely once saw three subscription options on The Economist’s website. Online access for $59. Print for $125. Print plus online, also for $125.

The second option looks strange: who would take it? Ariely offered the choice to MIT students. Nobody chose print alone. Most, 84%, chose the $125 bundle. Then he removed the “useless” option. The picture reversed: now 68% chose the cheap online subscription.

The unnecessary option worked as a decoy. Beside it, the bundle looked like a good deal. Ariely believes we rarely evaluate something in isolation and more often compare it with what is beside it. This is called the decoy effect. Other researchers later showed that it does not always work outside the laboratory.

At a café, a small cup costs 200, a large one 350, and a medium one 330. Your hand reaches for the large one: “Only twenty more.”

When one option is clearly worse than another, ask why it is on the menu. Sometimes it is there to make its neighbor look like better value.

Read in Livria

About the author

Dan Ariely is an Israeli-American psychologist and behavioral economics researcher. When the book appeared, he worked at MIT; he later became a professor at Duke University.

All books by this author: Dan Ariely

Terms from the book

  • Placebo
  • Endowment effect
  • Anchor
  • Behavioral economics: A field of research at the intersection of economics and psychology. It studies how people actually decide rather than how models of a fully rational person prescribe they should.
  • Decoy effect: A phenomenon in which an obviously less advantageous option can make a neighboring option more attractive. Its strength depends on conditions and may be weaker outside laboratories.
  • Social norms: In Ariely’s framework, rules of relationships built on reciprocity and trust, unlike market norms in which services are exchanged for money.

All terms

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