Irrational Behaviour Part 1
2.1 Nurse example, we assume we are right
ipad red count-bee suit professor example
2.2 Defaults
Organ donation - UK-France, Sweden-Denmark Default yes
we take the path of least resistance
default have big value
we create stories to justify our actions
Generic vs branded medicine
People do not want to do something different, even if they are minor and better
be aware of defaults
6 jam and 24 jams in supermarket
the path of least resistance
2.3 Preference depend on environment
3 reasons to like thing - show more confidence
10 reasons to like thing - less confident
conclusions:you can like/love with one reason or no reason
2.4 How often do you floss your teeth
two scale 0 to >9 per month feel good, and 0 to >9 per day feel bad ->affects immediate decisions
so if you want to get people subscribed give them similar test
if you want someone to take risk -> ask to assume if had huge money what would he do
if you want someone to be cautious -> ask to remember poor days
Rome without coffee and Rome with coffee -> easy decision to make
The Decoy effect, web $59, print $127, web+print = $127
competition between sea lions to be largest -> danger
similarly competition between children to get first rank
eg 2: in a musical if all rows stand up every body sees same with added discomfort
eg 3: better neighborhood, competition with neighbor
eg 4: dating scene easy to choose between ugly jerry, jerry, tom
2.5 herding = following other people
self-herding = following your past decisions
eg 1: two fast food joints, public go to crowded
eg 2: fire accident all people run to single escape and other escape remains empty
eg 3: dunkin' donuts and starbucks, choose starbucks even if it is costly
you only remember your past decision not your emotions of past actions
create separate brand from competitor
eg 4: iphone, android and other smartphones
eg 5:social security no., would you pay last two digits and what would you pay? price allocated to random products
thus, if you want to increase price of something first ask first ask would you be willing to pay [humongous price]?
eg 6: would you be willing to pay $5 for my poem recitation, would you listen to my poem if I pay $5 to you?
how much would you pay for short, medium, long recitation? how much will you demand for listening short, medium, long?
we don't compare between the categories, we compare between same category.
in restaurant, we do not compare b/w starter and main-course and dessert w.r.t price or w.r.t to nutrition or calories
that's why starbucks tried to make category diff. from dunkin', now it can sell petties etc.
eg 7: Iphone price is reduced in short time so that people can have something to compare with. costly iphone vs. cheap iphone
learn: if your product is $4. set its price to $4.5 and reduce its price to $4, so that people can compare
this is done by local shop vendors by setting price high and by haggling they reduce it
this is same in case of big bazaar or flipkart where they provide discount
this way we only compare same product: one cheap and one costly
2.6 memento mori in : remember you are mortal
people usually fail to notice their irrational behavior
therefore start doubting yourself,
follow method of computer hacker -> divide problem in smallest part and try to guess fault in these parts
doubt your intuitions -> experiment more ->
3.1 opportunity cost
think what you will not be able to buy by buying specific thing
money (compared to barter) makes it harder to think in opportunity cost
a holiday = 7000 books = 200000 coffees
imagine: every-week you are given cash to spend -> better spending
but if cash is given for whole year -> bad spending
when problems are complex we take shortcuts
joke: gave kids away coz they missed going to theatres
sony $1000 pioneer = $1000 pioneer = $1000
pioneer $1000 sony = $700 sony = $1000 + (free)$300 casset
we prefer easy calculation, that is why 3rd option is more appealing even it has reduced our choice
if you want to get work done don't offer $3 but a coffee
3.2 we see money not in absolute terms but in relative terms
go to another shop for $2 reduction in price of pen
but this is not the case if $2 is reduced on price of DSLR
similarly, we haggle for 1 or 2 rs while buying veg but we spend so much in buying car, house, redecoration etc. if we can haggle in this. we can save much more
we are happy to pay extra for chair in car but we don't pay extra for chair in office (more used)
where will you work 100, 95, 90 or 85, 80, 75... most people choose 90 even if they accept that happiness is in 85
we think in terms of percentages
3.3 pain of paying money increases if paying is coupled with consumption
paying during the trip is much more painful than paying in advance or post paying
eg: if electricity meter is in center of house and it shows how much money you have to pay
eg: car showed how much rupee you have consumed, if ac worked on coupon basis
to increase pain: use cash, receive notification of online payment
to decrease pain: use card, prepay, keep payment hidden,
gifting is good because it reduces your pain of paying even if the payment is from your joint account
thats why: poker is played with chips (prepaid, not cash)
AOL example: $5 , $20 limited to $20 unlimited ->demand increased rapidly (reduced the pain of paying)
3.4 we assign money to specific categories
eg: $10 movie tickets lost or $10 lost ... in one case you will watch movie in other you will not
we treat assigned money differently
money prepaid to you for your workshop in another city fair, money paid at that time in cash
the artist will spend more if they are paid in cash then and there [comicon]
idea: ticket price can be rs 500=ticket+200 coupon to buy 400 =ticket only
3.5 we are more willing to pay a lock smith who tries for 1 hr to break a lock
learn: show your effort, if payment is flexible
eg: we were more willing to pay banking assistant but not ATM although
ATMs require huge cost to install they do not show effort
for that, market how hard it is to make ATM machine and get them working
our ideas of fairness if based upon current cost not on capital cost
two friends on beach example: price we are willing to pay may differ on from where we are buying the product: hotel or grocery store
3.6 loss aversion
we fear loss more than our love for profit
money that we don't get < money that goes from our hand
endowment - we feel ownership of things we get even if they are free
- we feel they are better
- messey sonalika debate, laptops, computer, politicians
eg: 50% free coffee mugs and 50% free chocolate
we start to give more value to result
eg: our family is best, house, location etc.
eg: tickets to game, owner wanted to sell at $2000 but buyer only $100
eg: 30 Day money back guarantee,
same is applied by companies such as flipkart, amazon by home delivery
very few people return the items
ipad red count-bee suit professor example
2.2 Defaults
Organ donation - UK-France, Sweden-Denmark Default yes
we take the path of least resistance
default have big value
we create stories to justify our actions
Generic vs branded medicine
People do not want to do something different, even if they are minor and better
be aware of defaults
6 jam and 24 jams in supermarket
the path of least resistance
2.3 Preference depend on environment
3 reasons to like thing - show more confidence
10 reasons to like thing - less confident
conclusions:you can like/love with one reason or no reason
2.4 How often do you floss your teeth
two scale 0 to >9 per month feel good, and 0 to >9 per day feel bad ->affects immediate decisions
so if you want to get people subscribed give them similar test
if you want someone to take risk -> ask to assume if had huge money what would he do
if you want someone to be cautious -> ask to remember poor days
Rome without coffee and Rome with coffee -> easy decision to make
The Decoy effect, web $59, print $127, web+print = $127
competition between sea lions to be largest -> danger
similarly competition between children to get first rank
eg 2: in a musical if all rows stand up every body sees same with added discomfort
eg 3: better neighborhood, competition with neighbor
eg 4: dating scene easy to choose between ugly jerry, jerry, tom
2.5 herding = following other people
self-herding = following your past decisions
eg 1: two fast food joints, public go to crowded
eg 2: fire accident all people run to single escape and other escape remains empty
eg 3: dunkin' donuts and starbucks, choose starbucks even if it is costly
you only remember your past decision not your emotions of past actions
create separate brand from competitor
eg 4: iphone, android and other smartphones
eg 5:social security no., would you pay last two digits and what would you pay? price allocated to random products
thus, if you want to increase price of something first ask first ask would you be willing to pay [humongous price]?
eg 6: would you be willing to pay $5 for my poem recitation, would you listen to my poem if I pay $5 to you?
how much would you pay for short, medium, long recitation? how much will you demand for listening short, medium, long?
we don't compare between the categories, we compare between same category.
in restaurant, we do not compare b/w starter and main-course and dessert w.r.t price or w.r.t to nutrition or calories
that's why starbucks tried to make category diff. from dunkin', now it can sell petties etc.
eg 7: Iphone price is reduced in short time so that people can have something to compare with. costly iphone vs. cheap iphone
learn: if your product is $4. set its price to $4.5 and reduce its price to $4, so that people can compare
this is done by local shop vendors by setting price high and by haggling they reduce it
this is same in case of big bazaar or flipkart where they provide discount
this way we only compare same product: one cheap and one costly
2.6 memento mori in : remember you are mortal
people usually fail to notice their irrational behavior
therefore start doubting yourself,
follow method of computer hacker -> divide problem in smallest part and try to guess fault in these parts
doubt your intuitions -> experiment more ->
3.1 opportunity cost
think what you will not be able to buy by buying specific thing
money (compared to barter) makes it harder to think in opportunity cost
a holiday = 7000 books = 200000 coffees
imagine: every-week you are given cash to spend -> better spending
but if cash is given for whole year -> bad spending
when problems are complex we take shortcuts
joke: gave kids away coz they missed going to theatres
sony $1000 pioneer = $1000 pioneer = $1000
pioneer $1000 sony = $700 sony = $1000 + (free)$300 casset
we prefer easy calculation, that is why 3rd option is more appealing even it has reduced our choice
if you want to get work done don't offer $3 but a coffee
3.2 we see money not in absolute terms but in relative terms
go to another shop for $2 reduction in price of pen
but this is not the case if $2 is reduced on price of DSLR
similarly, we haggle for 1 or 2 rs while buying veg but we spend so much in buying car, house, redecoration etc. if we can haggle in this. we can save much more
we are happy to pay extra for chair in car but we don't pay extra for chair in office (more used)
where will you work 100, 95, 90 or 85, 80, 75... most people choose 90 even if they accept that happiness is in 85
we think in terms of percentages
3.3 pain of paying money increases if paying is coupled with consumption
paying during the trip is much more painful than paying in advance or post paying
eg: if electricity meter is in center of house and it shows how much money you have to pay
eg: car showed how much rupee you have consumed, if ac worked on coupon basis
to increase pain: use cash, receive notification of online payment
to decrease pain: use card, prepay, keep payment hidden,
gifting is good because it reduces your pain of paying even if the payment is from your joint account
thats why: poker is played with chips (prepaid, not cash)
AOL example: $5 , $20 limited to $20 unlimited ->demand increased rapidly (reduced the pain of paying)
3.4 we assign money to specific categories
eg: $10 movie tickets lost or $10 lost ... in one case you will watch movie in other you will not
we treat assigned money differently
money prepaid to you for your workshop in another city fair, money paid at that time in cash
the artist will spend more if they are paid in cash then and there [comicon]
idea: ticket price can be rs 500=ticket+200 coupon to buy 400 =ticket only
3.5 we are more willing to pay a lock smith who tries for 1 hr to break a lock
learn: show your effort, if payment is flexible
eg: we were more willing to pay banking assistant but not ATM although
ATMs require huge cost to install they do not show effort
for that, market how hard it is to make ATM machine and get them working
our ideas of fairness if based upon current cost not on capital cost
two friends on beach example: price we are willing to pay may differ on from where we are buying the product: hotel or grocery store
3.6 loss aversion
we fear loss more than our love for profit
money that we don't get < money that goes from our hand
endowment - we feel ownership of things we get even if they are free
- we feel they are better
- messey sonalika debate, laptops, computer, politicians
eg: 50% free coffee mugs and 50% free chocolate
we start to give more value to result
eg: our family is best, house, location etc.
eg: tickets to game, owner wanted to sell at $2000 but buyer only $100
eg: 30 Day money back guarantee,
same is applied by companies such as flipkart, amazon by home delivery
very few people return the items
Comments
Post a Comment