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Book Review on 'Predictably Irrational' by Dan Ariely - Essay Example

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Book Review on 'Predictably Irrational' Introduction This is a book review of the book “Predictably Irrational: The Hidden Forces That Shape Our Decisions” by Dan Ariely produced in the year 2008. Dan Ariely is an economist professor at M.I.T. (Ariely 1)…
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Book Review on Predictably Irrational by Dan Ariely
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"Book Review on 'Predictably Irrational' by Dan Ariely"

Download file to see previous pages While as classical economics explains how humans are rational beings who exercise logic in analyzing the merits and demerits of given economic situations with an aim of making sound economic decisions, it does not explain in a perfect way how people behave making economic decisions. In light of this, that Dan Ariely is a new generation scientist that he negates in his predictably irrational book that human beings behave in fundamentally rational ways. Dan Ariely thus uses the everyday experience and detailed and experimentation research to explain how expectations, emotions, social norms, and other invisible, seemingly illogical forces alter individual reasoning abilities. Dan Ariely uses ingenious experiments to explore how irrational forces and social norms influence our economic behavior. He observes that there is a cultural shift in making economic decisions where fewer market and social norms are now more satisfying, creative, fulfilling, and fun. He performs fun filled experiments on how people buy, sell, and make life time’s decisions thus demonstrating their predictable irrational economic decision making behaviors. This paper draws a clear review of how human beings demonstrate irrational behaviors while making fundamental economic decisions that relate to buying, selling, and other economically driven decisions. Summary of Content The book “Predictably Irrational: The Hidden Forces That Shape Our Decisions” by Dan Ariely has 15 chapters that discuss the modes of thinking and events that alter the traditional rational behavior in making economic decisions. Dan Ariely explains the truth about relativity confirming how humans frequently regard their environment in relation to others (Ariely 10). In doing this, people compare things that are easily comparable in arriving at certain decisions. He goes ahead to explain this comparison by giving examples of three honeymoon destination options two in Rome and one in Paris. He uses this example to describe the decoy where consumers tend to have a specific change in preference between two options when a third option surfaces. In light of this, Dan Ariely explains how relativity can help people make wise decisions and at the same time demeaning their lives. He relevantly notes that when people compare their lives to those of others in the same category, they tend to manifest envy and jealousy. He equally reckons that human beings rarely get satisfied and the more they get the more they aspire to get more. However, he notes that we can avert this by avoiding relativity by controlling the happenings around us. Dan Ariely explains the fallacy of supply and demand where consumers consider value, quality, or availability before making a purchasing decision. He notes that recommending a value to an item with no initial value leads to irrational pricing. He observes that although prices apply arbitrarily, consumers tend to anchor with those prices upon their first purchase. Indeed, the customers associate with this price for a long time affecting their social value and thus irrationality in price. Ariely hence uses the arbitrary price anchoring to challenge supply and demand theories saying that demand is subject to manipulation and thus affects market equilibrium. He therefore concludes that market equilibrium relies on consumer’s memory and not preferred choices. He further explains the cost of free notion where people choose free options in place of ...Download file to see next pagesRead More
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