predictably irrational the hidden forces that shape our decisions phần 10 pot

Simon Professor of Economics and Psychology at Carnegie Mellon University.. On one hand he carries out research in standard economics assuming that individuals are perfectly rational; on

Thanks

search projects with smart, creative, generous individu­ als T h e research described in this book is largely an outcome

of their ingenuity and insight These individuals are not only great researchers, but also close friends They made this re­ search possible Any mistakes and omissions in this book are mine (Short biographies of these wonderful researchers follow.) In addition to those with whom I have collaborated, I also want to thank my psychology and economics colleagues

at large Each idea I ever had, and every paper I ever wrote, was influenced either explicitly or implicitly by their writing, ideas, and creativity Science advances mainly through a se­ ries of small steps based on past research, and I am fortunate

to be able to take my own small steps forward from the foun­ dation laid down by these remarkable researchers At the end

of this book, I have included some references for other aca­ demic papers related to each of the chapters These should

to know you all—you even made Boston's winters worth­ while!

Figuring out how to write in "non-academese" was not easy, but I got a lot of help along the way My deepest thanks to J i m Levine, Lindsay Edgecombe, Elizabeth Fisher, and the incredible team at the Levine Greenberg Literary Agency I am also indebted to Sandy Blakeslee for her in­ sightful advice; and to J i m Bettman, Rebecca Waber, Ania Jakubek, Carlie Burck, Bronwyn Fryer, Devra Nelson, Janelle Stanley, Michal Strahilevitz, Ellen Hoffman, and Megan Hogerty for their role in helping me translate some

of these ideas into words Special thanks to my writing partner, Erik Calonius, who contributed many of the real- world examples found in these pages, in a style that helped

me tell this story as well as it could be told Special thanks also go to my trusting, supporting, and helpful editor at HarperCollins, Claire Wachtel

I wrote the book while visiting the Institute for Advanced Study at Princeton I cannot imagine a more ideal environ­ ment in which to think and write I even got to spend some

246

t h a n k s

time in the institute's kitchen, learning to chop, bake, sauté, and cook under the supervision of chefs Michel Reymond and Yann Blanchet—I couldn't have asked for a better place

to expand my horizons

Finally, thanks to my lovely wife, Sumi, who has listened

to my research stories over and over and over and over And while I hope you agree that they are somewhat amusing for the first few reads, her patience and willingness to repeatedly lend me her ear merits sainthood Sumi, tonight I will be home at seven-fifteen at the latest; make it eight o'clock, maybe eight-thirty; I promise

247

List of Collaborators

On Amir

On joined M I T as a PhD student a year after me and be­ came "my" first student As my first student, On had a tre­ mendous role in shaping what I expect from students and how I see the professor-student relationship In addition to being exceptionally smart, On has an amazing set of skills, and what he does not know he is able to learn within a day

or two It is always exciting to work and spend time with him On is currently a professor at the University of Califor­ nia at San Diego

Marco Bertini

When I first met M a r c o , he was a PhD student at Harvard Business School, and unlike his fellow students he did not see the Charles River as an obstacle he should not cross Marco is Italian, with a temperament and sense of style to

l i s t o f c o l l a b o r a t o r s

250

match—an overall great guy you just want to go out for a drink with M a r c o is currently a professor at London Busi­ ness School

Ziv Carmon

Ziv was one of the main reasons I joined Duke's PhD pro­ gram, and the years we spent together at Duke justified this decision Not only did I learn from him a great deal about decision making and how to conduct research; he also be­ came one of my dear friends, and the advice I got from him over the years has repeatedly proved to be invaluable Ziv is currently a professor at INSEAD's Singapore campus

Shane Frederick

I met Shane while I was a student at Duke and he was a stu­ dent at Carnegie Mellon We had a long discussion about fish over sushi, and this has imprinted on me a lasting love for both A few years later Shane and I both moved to M I T and had many more opportunities for sushi and lengthy discus­ sions, including the central question of life: " I f a bat and a ball cost $1.10 in total, and the bat costs a dollar more than the ball, how much does the ball cost?" Shane is currently a professor at M I T

James Heyman

James and I spent a year together at Berkeley He would often come in to discuss some idea, bringing with him some of his recent baking outputs, and this was always a good start for an interesting discussion Following his life's maxim that money isn't everything, his research focuses on nonfinancial aspects

of marketplace transactions One of James's passions is the many ways behavioral economics could play out in policy

do in a semester In addition, he is one of the nicest people I have ever met and always a delight to chat and work with Leonard is currently a professor at Columbia University

George Loewenstein

George is one of my first, favorite, and longest-time collabo­ rators He is also my role model In my mind George is the most creative and broadest researcher in behavioral econom­ ics George has an incredible ability to observe the world around him and find nuances of behavior that are important for our understanding of human nature as well as for policy

l i s t o f c o l l a b o r a t o r s

252

George is currently, and appropriately, the Herbert A Simon Professor of Economics and Psychology at Carnegie Mellon University

I hoped that she would never decide to leave; but, alas, at some point the time came: she is currently a professor at the University of Toronto In an alternative reality, Nina is a high-fashion designer in Milan, Italy

Elie Ofek

Elie is an electrical engineer by training who then saw the light (or so he believes) and switched to marketing Not sur­ prisingly, his main area of research and teaching is innova­ tions and high-tech industries Elie is a great guy to have coffee with because he has interesting insights and perspec­ tives on every topic Currently, Elie is a professor at Harvard Business School (or as its members call it, " T h e Haaarvard Business School")

Yesim Orhun

Yesim is a true delight in every way She is funny, smart, and sarcastic Regrettably, we had only one year to hang out while we were both at Berkeley Yesim's research takes find­ ings from behavioral economics and, using this starting point, provides prescriptions for firms and policy makers

l i s t o f c o l l a b o r a t o r s

253

For some odd reason, what really gets her going is any re­

search question that includes the words simultaneity and

en-dogeneity Yesim is currently a professor at the University of

Chicago

Drazen Prelec

Drazen is one of the smartest people I have ever met and one of the main reasons I joined M I T I think of Drazen as academic royalty: he knows what he is doing, he is sure of himself, and everything he touches turns to gold I was hop­ ing that by osmosis, I would get some of his style and depth, but having my office next to his was not sufficient for this Drazen is currently a professor at M I T

Kristina Shampanier

Kristina came to M I T to be trained as an economist, and for some odd but wonderful reason elected to work with me Kristina is exceptionally smart, and I learned a lot from her over the years As a tribute to her wisdom, when she gradu­ ated from M I T , she opted for a nonacademic job: she is now

a high-powered consultant in Boston

Jiwoong Shin

Jiwoong is a yin and yang researcher On one hand he carries out research in standard economics assuming that individuals are perfectly rational; on the other hand he carries out re­ search in behavioral economics showing that people are irra­ tional He is thoughtful and reflective—a philosophical type—and this duality does not faze him Jiwoong and I started working together mostly because we wanted to have fun together, and indeed we have spent many exciting hours

Rebecca Waber

Rebecca is one of the most energetic and happiest people I have ever met She is also the only person I ever observed to burst out laughing while reading her marriage vows Rebecca

is particularly interested in research on decision making ap­ plied to medical decisions, and I count myself as very lucky that she chose to work with me on these topics Rebecca is currently a graduate student at the Media Laboratory at

M I T

Klaus Wertenbroch

Klaus and I met when he was a professor at Duke and I was a PhD student Klaus's interest in decision making is mostly based on his attempts to make sense of his own deviation from rationality, whether it is his smoking habit or his pro­ crastination in delaying work for the pleasure of watching soccer on television It was only fitting that we worked to­ gether on procrastination Klaus is currently a professor at

I N S E A D

Notes

1 Jodi Kantor, "Entrees Reach $ 4 0 , " New York Times (Oc­

tober 2 1 , 2 0 0 6 )

2 Itamar Simonson, "Get Closer to Your Customers by Un­

derstanding How They M a k e Choices," California Man­

agement Review (1993)

3 Louis Uchitelle, "Lure of Great Wealth Affects Career

Choices," New York Times (November 27, 2 0 0 6 )

4 Katie Hafner, "In the Web World, Rich Now Envy the

Superrich," New York Times (November 2 1 , 2 0 0 6 )

5 Valerie Ulene, "Car Keys? Not So Fast," Los Angeles

Times (January 8, 2 0 0 7 )

6 John Leland, "Debtors Search for Discipline through

Blogs," New York Times (February 18, 2 0 0 7 )

7 Colin Schieman, " T h e History of Placebo Surgery," Uni­ versity of Calgary (March 2 0 0 1 )

8 Margaret Talbot, " T h e Placebo Prescription," New York

Times (June 9, 2 0 0 0 )

Multi-Center Trial," Lancet (April 12, 2 0 0 3 )

11 "Off-Label Use of Prescription Drugs Should Be Regu­ lated by the FDA," Harvard Law School, Legal Electronic Archive (December 11, 2 0 0 6 )

12 Irving Kirsch, "Antidepressants Proven to Work Only

Slightly Better Than Placebo," Prevention and Treatment

(June 1998)

13 Sheryl Stolberg, "Sham Surgery Returns as a Research

Tool," New York Times (April 2 5 , 1999)

14 Margaret E O'Kane, National Committee for Quality

Assurance, letter to the editor, USA Today (December 11,

2 0 0 6 )

15 Federal Bureau of Investigation, Crime in the United

States 2004—Uniform Crime Reports (Washington,

D.C.: U.S Government Printing Office, 2 0 0 5 )

16 Brody Mullins, "No Free Lunch: New Ethics Rules Vex

Capitol Hill," Wall Street Journal (January 29, 2 0 0 7 )

17 "Pessimism for the Future," California Bar Journal (No­

vember 1994)

18 Maryland Judicial Task Force on Professionalism (Novem­

professionalism2003.pdf

19 Florida Bar/Josephson Institute Study (1993)

20 DP A Correlator, Vol 9, No 3 (September 9, 2 0 0 2 ) See

also Steve Sonnenberg, " T h e Decline in Professionalism—

A Threat to the Future of the American Association of

Petroleum Geologists," Explorer (May 2 0 0 4 )

256

n o t e s

21 Jan Crosthwaite, "Moral Expertise: A Problem in the

Professional Ethics of Professional Ethicists," Bioethics,

V o l 9 (1995): 361-379

2 2 The 2002 Transparency International Corruption Percep­

23 McKinsey and Company, "Payments: Charting a Course

to Profits" (December 2 0 0 5 )

257

Daniel Kahneman, Barbara L Fredrickson, Charles A Schreiber, and Donald A Redelmeier, "When More Pain Is

Preferred to Less: Adding a Better End," Psychological Science

(1993)

Donald A Redelmeier and Daniel Kahneman, "Patient's Memories of Painful Medical Treatments—Real-Time and Retrospective Evaluations of Two Minimally Invasive Proce­

dures," Pain (1996)

Dan Ariely, "Combining Experiences over Time: The Effects

of Duration, Intensity Changes, and On-Line Measurements

on Retrospective Pain Evaluations," Journal of Behavioral Deci­

sion Making (1998)

b i b l i o g r a p h y a n d a d d i t i o n a l r e a d i n g s

Dan Ariely and Ziv Carmon, "Gestalt Characteristics of

Experienced Profiles," Journal of Behavioral Decision Mak­

Amos Tversky and Daniel Kahneman, " T h e Framing of

Decisions and the Psychology of Choice," Science (1981)

Joel Huber, John Payne, and Chris Puto, "Adding Asym­ metrically Dominated Alternatives: Violations of Regularity

and the Similarity Hypothesis," Journal of Consumer Re­

search (1982)

Itamar Simonson, "Choice Based on Reasons: The Case

of Attraction and Compromise Effects," Journal of Con­

sumer Research (1989)

Amos Tversky and Itamar Simonson, "Context-Dependent

Preferences," Management Science (1993)

Dan Ariely and Tom Wallsten, "Seeking Subjective Domi­ nance in Multidimensional Space: An Explanation of the

Asymmetric Dominance Effect," Organizational Behavior

and Human Decision Processes (1995)

Constantine Sedikides, Dan Ariely, and Nils Olsen, "Con­ textual and Procedural Determinants of Partner Selection:

On Asymmetric Dominance and Prominence," Social Cogni­

tion (1999)

Chapter 2 : T h e Fallacy of Supply and Demand

BASED ON

Dan Ariely, George Loewenstein, and Drazen Prelec,

"Coherent Arbitrariness: Stable Demand Curves without

260

b i b l i o g r a p h y a n d a d d i t i o n a l r e a d i n g s

261

Stable Preferences," Quarterly Journal of Economics

( 2 0 0 3 )

Dan Ariely, George Loewenstein, and Drazen Prelec,

"Tom Sawyer and the Construction of Value," Journal of

Economic Behavior and Organization ( 2 0 0 6 )

RELATED READINGS

Cass R Sunstein, Daniel Kahneman, David Schkade, and

liana Ritov, "Predictably Incoherent Judgments," Stanford

Law Review (2002)

Uri Simonsohn, "New Yorkers Commute More Every­

where: Contrast Effects in the Field," Review of Economics

Kristina Shampanier, Nina Mazar, and Dan Ariely, "How

Small Is Zero Price? The True Value of Free Products," Marketing

Science (2007)

RELATED READINGS

Daniel Kahneman and Amos Tversky, "Prospect T h e ­

ory: An Analysis of Decision under Risk," Econometrica

(1979)

Eldar Shafir, Itamar Simonson, and Amos Tversky,

"Reason-Based Choice," Cognition (1993)

b i b l i o g r a p h y a n d a d d i t i o n a l r e a d i n g s s

Chapter 4 : T h e Cost of Social Norms

BASED ON

Uri Gneezy and Aldo Rustichini, "A Fine Is a Price," Jour­

nal of Legal Studies ( 2 0 0 0 )

James Heyman and Dan Ariely, "Effort for Payment: A

Tale of Two Markets," Psychological Science (2004)

Kathleen Vohs, Nicole Mead, and Miranda Goode, "The

Psychological Consequences of Money," Science (2006)

RELATED READINGS

Margaret S Clark and Judson Mills, "Interpersonal At­

traction in Exchange and Communal Relationships," Journal

of Personality and Social Psychology, Vol 37 (1979), 12-24

Margaret S Clark, "Record Keeping in Two Types of Re­

lationships," Journal of Personality and Social Psychology,

V o l 4 7 (1984), 549-557

Alan Fiske, " T h e Four Elementary Forms of Sociality:

Framework for a Unified Theory of Social Relations," Psy­

chological Review (1992)

Pankaj Aggarwal, " T h e Effects of Brand Relationship

Norms on Consumer Attitudes and Behavior," Journal of

George Loewenstein, "Out of Control: Visceral Influences

on Behavior," Organizational Behavior and Human Deci­

sion Processes (1996)

262