Dan Ariely and Behavioral Economics (Part I)

Dan ArielyToday i had the chance to see Dan Ariely, (the author of the two best sellers The Upside of Irrationality and Predictably Irrational) live on stage, many thanks to Turkcell Akademi. To be honest i had not read any of his books but after his great speech today, i’ll do that for sure! For the ones who’s interested the topics like “consumer behaviour” or even “psychology” independent from marketing issues, it is a must to read this man!

The most interesting part for me was of course the case studies and the outputs of the researches he’s been working on. Putting on effort and creating an output of a research is the easiest part i think but the construct of these studies are the real part that requires Dan’s genius. I enjoyed listening to him today rather than taking notes but i will do my best to share what i earned from this great person. I hope it is not a rude thing to share some of his slides and case studies here but my only intention is to archive my notes and somehow influence people go buy his books. After reading him, you’ll definitely question yourself in every action you take and every decision you make… I’ll try to summarize a few of his studies and share the rest in my next post.

Brain Illusions and Decisions:

Most of the decisions are taken by beliefs, but how much information do we use to use these beliefs for taking decisions? This is the critical question. Our brain makes systematic mistakes regardless of information. Brain illusions are good examples to prove this. Let’s see “Longer Table Illusion.” If you’re asked which table is longer the obvious answer should be the table at the right side. But the reality is different. If you measure the longer sides of each table, you’ll face the truth that these two tables are identically equal in terms of length. You can test it yourself… Even this reality is proved with the information, our eyes see the both table again and our brain still keeps making us think that the table on the left is longer. There is another, actually well known test below. You need to watch the video and answer the question: How many times did the people wearing white pass the ball. If you already know, just skip it… :)

So this test shows us that we only see what we focus and what we expect. If we can make so many mistakes of vision, even with our eyes that are most trusted, then we can make many other mistakes in lots of other fields, like decision making.

Organ Donations in Europe

Dan Ariely gave out the percentages of the people who give permission for the donation of their organs in the process of gaining their driving licences. The results are at shown in figure. Countries like Austria, Belgium, France, Hungary, Portugal and Sweeden have almost 100% of organ donation attendance, which means all of the drivers in these countries gave permission of their organs to be donated after death. So what could be the problem with Denmark, Netherlands, UK and Germany. They are also very wealthy and educated European countries and moreover there has been a huge campaign in Netherlands about organ donation but it helped the percentage to climb to only to 28%. Dan, finally finds out that the countries with higher percentage have opt-in system, which means people check the box in the driving licence for if they want to join donation and the countries with lower percentage have opt-out which means people check the box if they do not want to join. And the real outcome is the fact that people do not want to make many decisions, they feel well when they accept the dictates of the environment. Even this is the fact, people try to create logical reasons for their behaviours. For example people who do not opt-in think they will feel worried if they sign and donate their organs, may be they will be unplugged early just to have their organs for other people. And the people who do not opt-out feels the pleasure of being such a wonderful person and citizen the way that they did not object the idea of donating their organs…

Our Preferences

There are 2 focus groups of people, who have a lover and one group is asked to define 3 reasons why you love the person you are together and the other group is asked to come out with 10 reasons… Afterwards they are asked about their love attitude is asked, they are asked where the relationship is going, to engagement, to marriage etc.. It appears in the end that the people in the group that give 3 reasons have a higher love attitude that the other group and the reason is that giving 10 specific and independent reasons to love someone is actually not so easy. Most of the people start to pause after 4th reason. But not having this information, they feel uncomfortable about the relationship because they think they don’t have much reasons to love that person… The same thing works for brands as well.

More cases to come in the next post…