Irrational Decisions – Relativity

by Stephen Mills on October 18, 2009

Einstein

Everything is relative right?  Well, at least in our decision making process that might actually be the case.  Dain Ariely wrote a bestselling book last year called Predictably Irrational in which he described various irrational decision making behaviors that we crazy human beings engage in.  The “predictable” part comes in because these irrational behaviors are consistent and predictable.  We are irrational in truly predictable ways.  I’m going to share some of them with you in a series of articles.

Other than being interesting in their own right, hopefully by being aware of our irrational decision making tendencies we can do a better job of avoiding them.  Maybe we can even use them to our advantage.

One of the behaviors he described really fascinates me.  We humans seem to make choices by comparison shopping.  We have a hard time choosing between dissimilar alternatives, but throw in something to compare one of the choices with, and all of a sudden the decision becomes easy.  Watch out for this one because it affects your purchasing decisions!

Professor Ariely conducted a fascinating experiment with photos of good looking people.  He first collected data on which photos were judged as the most attractive.  Then he picked a couple of evenly rated photos of men who did not look similar to one another and asked people to pick the most attractive of the two choices – A or B.  The results split about evenly.  People had no obvious basis on which to judge one of them more attractive than the other.

Now here is where it gets really interesting.  He “uglycized” one of the photos on his computer and included this less attractive version in the set of alternatives.  People were asked to choose the most attractive from among the original A and B and the less attractive version of A.  Now, the overwhelming majority of people chose A as the most attractive of the three.

From a rational and objective perspective this makes no sense.  Nobody is going to pick ugly A as the most attractive, but the pictures of the original A and B remained unchanged.  A is objectively no more attractive than he was before, but with someone similar to compare him to, he seems to get a lot more attractive than B.  When the photo of ugly B was used instead of ugly A, most people chose B as the most attractive.  The professor suggests you take along a less attractive friend who resembles you in some way when you are trolling for dates 🙂

Marketers will use this trick to influence your buying decisions.  It’s called a decoy and it dramatically affects the decisions you will make.  Professor Ariely conducted another experiment based upon a real advertisement.  He saw an advertisement for a subscription to the Economist that had the following three choices:

  1. Online version only – $59
  2. Print version only – $125
  3. Print and online version both – $125

Of course nobody is going to pick the print version only when they can get both for the same price so why include it?  Well it turns out that you include it because it drives most people to pick the most expensive third option.  When Professor Ariely studied the choices people make with these options, 84% chose option 3.  Why?  Because it is an obviously much more attractive $125 choice than option 2.  Irrational maybe, but it works.

What happened when he removed option 2 and presented the following choices?

  1. Online version only – $59
  2. Print and online version both – $125

Without the decoy option, 68% chose the least expensive online only option.  That’s an amazingly significant difference in behavior.

It seems we are wired to compare things that are easily comparable while avoiding trying to compare things that are not.  It takes a lot of thinking to decide between two good looking but dissimilar looking men, but easy to decide between two who share similar characteristics.  The inclusion of a less attractive alternative increases the absolute attractiveness of a similar choice.   Our brains take the easy way out.

Here are some more examples.  Home bread making machines were not selling when they were first introduced.  Nobody had anything to compare them to so they were not selected.  People chose to buy other appliances with their money where they could comparison shop.  So guess what the manufacturer did to solve the problem?  They introduced a second model that made the same kind of bread but that was much larger and much more expensive.  Magically it seems, the original version started flying off the shelves.  It was a much better alternative than the expensive model.

People will drive 15 minutes out of their way to save $7 on a $25 item, but they will not drive 15 minutes out of their way to save $7 on a $500 item.  If saving $7 is worth a 15 minute drive, it rationally shouldn’t matter how much you are spending in total.  Our brain thinks in relative terms and relative to $500, $7 is a piddling amount.  We are predictably irrational and everything is relative.

This trait in our decision making has enormous consequences and if you can stay aware of it, you are more likely to avoid it.  On the other hand you may be able to take advantage of it in your own marketing efforts.  Now let me think.  Hmm…  Which personal development blogs should I mention right now?  🙂

What do you think?  Leave a comment and join the conversation.

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{ 3 trackbacks }

The Key to Making Wise Decisions
October 27, 2009 at 4:18 pm
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October 28, 2009 at 9:15 am
Ambien and brain injuries.
September 22, 2010 at 5:12 pm

{ 48 comments… read them below or add one }

Miche - Serenity Hacker October 18, 2009 at 3:50 pm

Great post! Totally makes you think before you buy… I’ve heard some of this prof’s podcasts on iTunes U, he works at Duke University, but I never ran across the $7 / 15 minute drive thing. That to me seems like such a waste if I’m spending $500, but seems pretty logical (barring rising gas prices) if I’m spending $25. I guess this just proves how irrational I really am. I’m glad I’m not alone! I’ll definitely be re-thinking purchases now, trying not think of savings in “relative” terms anymore.
.-= Miche – Serenity Hacker´s last blog ..There Is No Such Place As Stuck =-.

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Stephen Mills October 19, 2009 at 12:50 pm

Thanks for stopping in Miche. After I read this I realized I do the “what’s another $xx” type thing a lot. I think I make this relativity mistake a lot!

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Greg October 18, 2009 at 6:30 pm

This is a very interesting post! I’ve seen several seminars on marketing and its amazing how much science goes into the psychology of selling. It’s likely true that these guys know more about how influence decision-making to drive profits than any of us would like to believe…
.-= Greg´s last blog ..How Being An Optimist Is Holding You Back =-.

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Stephen Mills October 19, 2009 at 1:06 pm

Hi Greg. The amount of science on all this is just exploding and you know the marketers know and use it before we in the general public have a clue. Thanks for stopping by and commenting.

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Armen Shirvanian October 18, 2009 at 7:59 pm

Hey Stephen.

I read a good chunk of this book and remember that example. He sure presented some examples that really hit the point.

On that one about saving $7, I think many want to have a sense of deal-making in their mind, so saving $7 from a $25 item is a huge deal they can think of anytime they use it, and saving $7 off of a $500 item is like a 2%-off deal, which isn’t enough to feel smart about.

For the other example I have nothing to retort with other than that we are predictably irrational.

Thank for reminding me of this material. If we didn’t have some irrational features we would be like robots.
.-= Armen Shirvanian´s last blog ..A Hello Video With A Booming Introduction =-.

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Stephen Mills October 19, 2009 at 1:08 pm

Hi Armen, I’m sure you are right about the percentage thing. That was the point he was making. Our minds work on a relative basis whether it is a rational or not. Thanks!

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Walter October 19, 2009 at 1:13 am

Imagine how are we unconsciously manipulated by our minds! I think its part of our evolution that we have this peculiar traits. Still, we have the power to override our minds. 🙂
.-= Walter´s last blog ..Self mastery: the feared path =-.

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Stephen Mills October 19, 2009 at 1:11 pm

Hello Walter. I’m sure that all of these had an advantage earlier in our history when they evolved. It is great to be able to understand these traits and be able to override them in our modern world. Thank you.

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Diggy - Upgradereality.com October 19, 2009 at 4:43 am

Hey Stephen!

I LOVE these phychological studies showing the results of people choosing something by adding and removing different options. Many things in life revolve around marketing, even making friends and being social, that is about marketing yourself. The better you know how to do that, the easier life becomes:)

Great post!
Cheers
.-= Diggy – Upgradereality.com´s last blog ..Be True to Yourself – Tyler Durden Style =-.

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Stephen Mills October 19, 2009 at 1:17 pm

Hi Diggy, thanks for your comments. I agree that we are basically marketing ourselves all the time. Understanding our psychology can only help us become more effective.

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Gordie Rogers October 19, 2009 at 5:46 am

Fascinating. I would have guessed that the the guy without the uglized photo would have got picked as better looking. My rationale is that wouldn’t be perceived as resembling anything ugly. Oh well, shows the human mind is a marvelous mystery.
.-= Gordie Rogers´s last blog ..Forgiveness Is Selfish. =-.

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Stephen Mills October 19, 2009 at 1:18 pm

Hi Gordie, I’m not sure what I would have guessed, but it sure is interesting 🙂

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Vin - NaturalBias October 19, 2009 at 7:23 am

Interesting stuff! I’m not surprised by the choices based on prices, but was definitely surprised by the choices made with the photos.
.-= Vin – NaturalBias´s last blog ..How to Judge Food Quality and Identify Processed Foods =-.

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Stephen Mills October 19, 2009 at 1:28 pm

Hi Vin, I love this kind of stuff. Thanks for your comment.

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Jay Schryer October 19, 2009 at 8:23 am

Very interesting…very interesting indeed. Having spent the first few years of my adult life in marketing and PR, I’m always fascinated by studies that look at the various psychological impulses that go into buying (and other) decisions. Thanks for sharing this. It could be really useful for people who want to drive traffic to their website.
.-= Jay Schryer´s last blog ..Memories Best Left Forgotten =-.

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Stephen Mills October 19, 2009 at 1:32 pm

Hi Jay. I think that people who understand a lot of this human psychology are definitely one step ahead. Thanks for commenting.

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David | ilcantone.com October 19, 2009 at 9:00 am

Stephen this is really interesting. I’m thinking how can I take advantage of this idea of relative thinking; I’m sure there are many ways to use it in my daily life.
What you said about the “item decoy” strategy used by marketers and salespersons is true. A long time ago I worked as a salesman at a department store and I used this “decoy” strategy many times, and it worked quite well. But I did it without knowing about it existence, I mean, I used it intuitively, unconsciously.

Great post Stephen.

See you soon.
.-= David | ilcantone.com´s last blog ..PAUL POTTS: INSPIRATIONAL VIDEO ON INCREASING YOUR CONFIDENCE =-.

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Stephen Mills October 19, 2009 at 1:38 pm

Hello David! Thanks for sharing your personal experience with these ideas. I’m definitely going to be on the watch out for the use of decoys in the future.

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Dayne | TheHappySelf.com October 19, 2009 at 4:36 pm

Very nice post Stephen, and made me think. You made some excellent points. Have you read the book, “Influence: The Psychology of Persuasion”? It’s excellent if you haven’t. 🙂
.-= Dayne | TheHappySelf.com´s last blog ..YOU =-.

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Stephen Mills October 20, 2009 at 9:30 pm

Hello Dayne. No I haven’t read that book but it is on my list now. Thank you!

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Nea | Self Improvement Saga October 19, 2009 at 6:53 pm

I can’t even start to tell you how many time I’ve fall into this trap where marketing is concerned. I’ll decide that I need a new gadget. I don’t need a fancy model because I have clue what all of the features do. However, I’ll jump onto the electronics company website and comparison shop. This is where the trouble starts. Not only are the features listed, they have explanations for what the features do. And then I suddenly decide that I desire these things. How irrational is that!!! To develop a sudden desire for something that I didn’t know existed a few minutes ago is crazy. Yet, I’ve done it so many times. I end up with the gadget version that is close to to-of-the-line. You really got me with this one, Stephen.
.-= Nea | Self Improvement Saga´s last blog ..Why You Shouldn’t Keep It Real: A Lesson on Unrealistic Living =-.

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Stephen Mills October 20, 2009 at 9:34 pm

Hi Nea. I’m really good (bad?) at comparison shopping just like you describe. Hopefully being aware of the psychology will make it easier to avoid. 🙂

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Suzanne October 19, 2009 at 6:55 pm

I also thought the same as Gordie, regarding the choice with the 3 photos. I would have assumed that choice overload would lead us to the one that was not similar as a safe bet.

When I read the part about driving for saving money, I realized the truth in it. We are conditioned to honor percentages more than thinking through the rationality of our behavior. Seven dollars saved is seven dollars…but it makes for a much better story on the $25 dollar purchase!
.-= Suzanne´s last blog ..My Best Tip for Housework Motivation =-.

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Stephen Mills October 20, 2009 at 9:36 pm

Hi Suzanne. Evidently our problem with choices is when there is no good reasons to pick one over the other as when they are dissimilar. I know I’m guilty of the percentage error. Thanks for commenting!

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Karlil October 19, 2009 at 8:10 pm

Great post Stephen. I read this sometime ago. And although I am well aware of the psychological factor in buying decision, to opt out of relativity is still harder than it seems. Or maybe it’s just me.
.-= Karlil´s last blog ..How To Be Lucky =-.

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Stephen Mills October 20, 2009 at 9:37 pm

Hi Nik. The author who wrote this particular book says he should know better than anyone and he is still aware of himself falling into the traps. It’s not just you!

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Jonathan - Advanced Life Skills October 19, 2009 at 8:45 pm

Stephen, this was absolutely fascinating. How easily our decision making process can be manipulated without us having a clue. Now I’ll be watching for various expressions of the “comparison model” when I look at ads and sales pages.
.-= Jonathan – Advanced Life Skills´s last blog ..Maintaining Your Youthful Enthusiasm At Any Age =-.

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Stephen Mills October 20, 2009 at 9:47 pm

Hi Jonathan. I really like all the new science emerging around how we make decisions. The truly scary thing is how this information will be used to manipulate us. Understanding the tricks is essential in protecting ourselves. Thanks for stopping by to comment.

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Lana-DreamFollowers Blog October 20, 2009 at 2:11 am

I have the book on my reading list now, always fascinating to learn how our brain works when we are not aware. Another reason to become more aware of your thoughts and actions as well as live more consciously.
.-= Lana-DreamFollowers Blog´s last blog ..Two Steps To Easily Change Your Habits =-.

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Stephen Mills October 20, 2009 at 9:48 pm

Hi Lana, thanks for commenting. It really is fascinating isn’t it?

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meatlessmama October 20, 2009 at 7:28 am

That is absolutely fascinating. The decoy option makes you feel smart, like you got a good deal when in reality you didn’t.
.-= meatlessmama´s last blog ..Favorite Fall Vegetable Recipe Roundup =-.

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Stephen Mills October 20, 2009 at 9:49 pm

Hello meatlessmam. We are all fascinated and I love it. Thanks for your comments 🙂

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BunnygotBlog October 20, 2009 at 7:52 am

This hits home with me. My husband is in advertising and he is also much better at purchasing products like electronics, then I am.
Recently I thought I was on top of things when researching a gadget. I checked pricing and even read the reviews which were all positive. I never considered the coffee maker or the fax machine we have that are not as great a quality with the same brand name.
When I brought it home my husband said to me I was adding to the garbage collection of junk, now we own 3 products that aren’t going to function right. I argued the point there were good reviews and he said likely the store wrote them.
Two days later, the product stopped working. I took it back and purchased a brand that my husband suggested and have been happy with it ever since.
This is funny because I wrote a short post that I haven’t published yet about my experience.
.-= BunnygotBlog´s last blog ..Halloween Recipes: Witchcraft =-.

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Stephen Mills October 20, 2009 at 9:51 pm

Hi Bunny. Thanks for sharing your story here on at the trap. I always love hearing from you 🙂

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Michelle @ Find Your Balance October 20, 2009 at 4:02 pm

So true and strikingly similar to the conversations I’m having with myself over pricing and bundling my health counseling services. Hmmm.
.-= Michelle @ Find Your Balance´s last blog ..Love to go, hate to unpack, and $500 for you! =-.

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Stephen Mills October 20, 2009 at 9:52 pm

Hi Michelle. I hope you can use it to your advantage. Thank your for sharing your thoughts with us.

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Justin October 23, 2009 at 1:27 pm

Great post! I work in advertising so this is something that I spend a lot of time thinking about.

Along the same lines, I think you’d like the book How We Decide by Jonah Lehrer.

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Tony October 23, 2009 at 3:45 pm

This gave me some new insight on my parents. We used to joke that they had a predilection to always picking the wrong thing. For example if given one choice between 10 correct decisions and 1 wrong decision, they seemed to always choose the wrong decision. Now I can see it was just the more obvious choice. 🙂

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Stephanie October 27, 2009 at 6:31 pm

Putting the two strands of your post together, it reminds me of some best friends I’ve known – where one is striking with a strong personality and the other is their similar, less noticable and more mellow side-kick. If you’re thinking about picking people up, it seems this combo may be a good deal for both concerned. The more conventionally attractive will be favoured by those whose strategy is close to the comparison photo idea – “they are similar enough that I can see this person is the better choice.” However, the sidekick may in turn be chosen by people going by the bread-machine theory of marketing – “they are similar but this one is less work, less egotistical, less demanding etc.” Just to turn some interesting research into pop psychology…
I think that taking these ideas you’re talking about away from how they operate in the world of money and into areas round politics, ethics and social relations could allow some important and useful and difficult thinking to begin to take place.

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Tom November 5, 2009 at 3:21 pm

Yeah, seems like the best strategy for politics is to introduce a similar but uglier third candidate. Dunno if people vote in the same way as how they spend though. I’m sure there is plenty of research to google.
It would be interesting to see if these irrational phenomena persist into group purchases or decisions made by committee, or do these have a irrational perversity all of their own?

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