The Irrational Bundle. Dan Ariely

      Contents

       Predictably Irrational

       The Upside of Irrationality

       The (Honest) Truth About Dishonesty

      About the Author

       Copyright

       About the Publisher

      Dedication

      To my mentors, colleagues, and students—

      who make research exciting

      Contents

      DEDICATION

      INTRODUCTION

       How an Injury Led Me to Irrationality and to the Research Described Here

      CHAPTER 1 - The Truth about Relativity

      Why Everything Is Relative—Even When It Shouldn’t Be

      CHAPTER 2 - The Fallacy of Supply and Demand

      Why the Price of Pearls—and Everything Else—Is Up in the Air

      CHAPTER 3 - The Cost of Zero Cost

      Why We Often Pay Too Much When We Pay Nothing

      CHAPTER 4 - The Cost of Social Norms

      Why We Are Happy to Do Things, but Not When We Are Paid to Do Them

      CHAPTER 5 - The Power of a Free Cookie

      CHAPTER 6 - The Influence of Arousal

      Why Hot Is Much Hotter Than We Realize

      CHAPTER 7 - The Problem of Procrastination and Self-Control

      Why We Can’t Make Ourselves Do What We Want to Do

      CHAPTER 8 - The High Price of Ownership

      Why We Overvalue What We Have

      CHAPTER 9 - Keeping Doors Open

      Why Options Distract Us from Our Main Objective

      CHAPTER 10 - The Effect of Expectations

      Why the Mind Gets What It Expects

      CHAPTER 11 - The Power of Price

      Why a 50-Cent Aspirin Can Do What a Penny Aspirin Can’t

      CHAPTER 12 - The Cycle of Distrust

      CHAPTER 13 - The Context of Our Character, Part I

      Why We Are Dishonest, and What We Can Do about It

      CHAPTER 14 - The Context of Our Character, Part II

      Why Dealing with Cash Makes Us More Honest

      CHAPTER 15 - Beer and Free Lunches

      What Is Behavioral Economics, and Where Are the Free Lunches?

      THANKS

      LIST OF COLLABORATORS

      NOTES

      BIBLIOGRAPHY AND ADDITIONAL READINGS

      PRAISE FOR PREDICTABLY IRRATIONAL

      Introduction

      How an Injury Led Me to Irrationality and

       to the Research Described Here

      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 immediately afterward) than those who haven’t? Or why honor codes actually do reduce dishonesty in the workplace?

      By the end of this book, you’ll know the answers to these and many other questions that have implications for your personal life, for your business life, and for the way you look at the world. Understanding the answer to the question about aspirin, for example, has implications not only for your choice of drugs, but for one of the biggest issues facing our society: the cost and effectiveness of health insurance. Understanding the impact of the Ten Commandments in curbing dishonesty might help prevent the next Enron-like fraud. And understanding the dynamics of impulsive eating has implications for every other impulsive decision in our lives—including why it’s so hard to save money for a rainy day.

      My goal, by the end of this book, is to help you fundamentally rethink what makes you and the people around you tick. I hope to lead you there by presenting a wide range of scientific experiments, findings, and anecdotes that are in many cases quite amusing. Once you see how systematic certain mistakes are—how we repeat them again and again—I think you will begin to learn how to avoid some of them.

      But before I tell you about my curious, practical, entertaining (and in some cases even delicious) research on eating, shopping, love, money, procrastination, beer, honesty, and other areas of life, I feel it is important that I tell you about the origins of my somewhat unorthodox worldview—and therefore of this book. Tragically, my introduction to this arena started with an accident many years ago that was anything but amusing.

      ON WHAT WOULD otherwise have been a normal Friday afternoon in the life of an eighteen-year-old Israeli, everything changed irreversibly in a matter of a few seconds. An explosion of a large magnesium flare, the kind used to illuminate battlefields at night, left 70 percent of my body covered with third-degree burns.

      The next three years found me wrapped in bandages in a hospital and then emerging into public only occasionally, dressed in a tight synthetic suit and mask that made me look like a crooked version of Spider-Man. Without the ability to participate in the same daily activities as my friends and family, I felt partially separated from society and as a consequence started to observe the very activities that were once my daily routine as if I were an outsider. As if I had come from a different culture (or planet), I started reflecting on the goals of different behaviors, mine and those of others. For example, I started wondering why I loved one girl but not another, why my daily routine was designed to be comfortable for the physicians but not for me, why I loved going rock climbing but not studying history, why I cared so much about what other people thought of me, and mostly what it is about life that motivates people and causes us to behave as we do.

      During the years in the hospital following my accident, I had extensive experience with different types of pain and a great deal of time between treatments and operations to reflect on it. Initially, my daily agony was largely played out in the “bath,” a procedure in which I was soaked in disinfectant solution, the bandages were removed, and the dead particles of skin were scraped off. When the skin is intact, disinfectants create a low-level sting, and in general the bandages come off easily. But when there is little or no skin—as in my case because of my extensive burns—the disinfectant stings unbearably, the bandages stick to the flesh, and removing them