Ramblings & ephemera

Dan Ariely on irrational decision making

From Dan Ariely’s “Dan Ariely asks, Are we in control of our own decisions?” (TED: 24 June 2009):

I’ll give you a couple of more examples on irrational decision making. Imagine I give you a choice. Do you want to go for a weekend to Rome? All expenses paid, hotel, transportation, food, breakfast, a continental breakfast, everything. Or a weekend in Paris? Now, a weekend in Paris, a weekend in Rome, these are different things. They have different food, different culture, different art. Now imagine I added a choice to the set that nobody wanted. Imagine I said, “A weekend in Rome, a weekend in Paris, or having your car stolen?” It’s a funny idea. Because why would having your car stolen, in this set, influence anything? But what if the option to have your car stolen was not exactly like this. What if it was a trip to Rome, all expenses paid, transportation, breakfast. But doesn’t include coffee in the morning. If you want coffee you have to pay for it yourself. It’s two euros 50. Now in some ways, given that you can have Rome with coffee, why would you possibly want Rome without coffee? It’s like having your car stolen. It’s an inferior option. But guess what happened. The moment you add Rome without coffee, Rome with coffee becomes more popular. And people choose it. The fact that you have Rome without coffee makes Rome with coffee look superior. And not just to Rome without coffee, even superior to Paris.

Here are two examples of this principle. This was an ad from The Economist a few years ago that gave us three choices. An online subscription for 59 dollars. A print subscription for 125. Or you could get both for 125. Now I looked at this and I called up The Economist. And I tried to figure out what were they thinking. And they passed me from one person to another to another. Until eventually I got to a person who was in charge of the website. And I called them up. And they went to check what was going on. The next thing I know, the ad is gone. And no explanation.

So I decided to do the experiment that I would have loved The Economist to do with me. I took this and I gave it to 100 MIT students. I said, “What would you choose?” These are the market share. Most people wanted the combo deal. Thankfully nobody wanted the dominated option. That means our students can read. But now if you have an option that nobody wants you can take it off. Right? So I printed another version of this. Where I eliminated the middle option. I gave it to another 100 students. Here is what happens. Now the most popular option became the least popular. And the least popular became the most popular.

What was happening was the option that was useless, in the middle, was useless in the sense that nobody wanted it. But it wasn’t useless in the sense that it helped people figure out what they wanted. In fact, relative to the option in the middle, which was get only the print for 125, the print and web for 125 looked like a fantastic deal. And as a consequence, people chose it. The general idea here, by the way, is that we actually don’t know our preferences that well. And because we don’t know our preferences that well we’re susceptible to all of these influences from the external forces. The defaults, the particular options that are presented to us. And so on.

One more example of this. People believe that when we deal with physical attraction, we see somebody, and we know immediately whether we like them or not. Attracted or not. Which is why we have these four-minute dates. So I decided to do this experiment with people. I’ll show you graphic images of people — not real people. The experiment was with people. I showed some people a picture of Tom, and a picture of Jerry. I said “Who do you want to date? Tom or Jerry?” But for half the people I added an ugly version of Jerry. I took Photoshop and I made Jerry slightly less attractive. (Laughter) The other people, I added an ugly version of Tom. And the question was, will ugly Jerry and ugly Tom help their respective, more attractive brothers? The answer was absolutely yes. When ugly Jerry was around, Jerry was popular. When ugly Tom was around, Tom was popular.

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