Reveals insights into how easily we are manipulated.
It goes through examples showing that how a bet (or business case) is presented will dramatically change the likelihood of it being accepted.
How anchoring (thinking of a number before you make a decision) has an impact that you would assert it couldn't have and is probably the most important message for those setting prices. Basically start high and discount.
In the mundane act of naming a price, we translate the desires of our hearts into the public language of numbers. That turns out to be a surprisingly tricky process.Read more at location 180
Car boot sales reveal a truth we might not care to admit in a business deal: prices are made-up numbers that don’t always carry much weightRead more at location 207
The illusion is so compelling that it makes a great pub bet. To collect, make sure you have some Post-it Notes. Carefully block off the surrounding chessboard squares with Post-it Notes, leaving just the squares containing A and B visible. (You’ll need about six small notes.) Not until you place the last note does it seem even conceivable that the two colours could be the same. Then suddenly, they ‘snap’ to the same medium gray.Read more at location 641
Amos Tversky and Paul Slovic later generalised this idea into a ‘compatibility principle.’ This rule says that decision makers give the most attention to information that is most compatible with the required answer.Read more at location 1244
‘People’s intuitions about random sampling appear to satisfy the law of small numbers, which asserts that the law of large numbers applies to small numbers as well.’Read more at location 1435
As Kevin Spacey says in The Usual Suspects (quoting Baudelaire): ‘The greatest trick the devil ever pulled was convincing man he didn’t exist.’Read more at location 1596
Our perceptual apparatus is attuned to the evaluation of changes rather than to the evaluation of absolute magnitudes . . . an object at a given temperature may be experienced as hot or cold to the touch depending on the temperature to which one had adapted.Read more at location 1621
that few want to accept a ‘fair’ bet with X = £100. Few accept X = £110, which offers a nice expected profit. (Those who do accept at this price tend to be gamblers, arbitrageurs, or economists.) The average person requires roughly a £200 prize to balance the prospect of an equally probable £100 loss.Read more at location 1631
Neither gains nor losses are additive. The pleasure of a £20 windfall is less than twice that of getting £10. This was the moral of S. S. Stevens’s little riddle, where it took about $40 to feel ‘twice as good’ as $10.Read more at location 1634
Financial advisors tell clients to consider their ‘risk tolerance’ in making money decisions. The trouble is, these four domains of behaviour coexist in all of us. A person who is risk-averse in one situation will become reckless in another. All it takes is a changed reference point.Read more at location 1664
The public was realistic enough to appreciate that prices sometimes have to go up. It was all right for shops to pass on their own increased costs. It was all right for a company that’s losing money to cut wages. But it wasn’t all right to take advantage of market forces (say, to raise prices on existing stock during a shortage). The cardinal rule of fairness appeared to be Don’t increase your profit at my expense.Read more at location 1747
Negotiation isn’t a pretty picture. Much of the time, the skillful negotiator is the one who best misrepresents value. It is not ‘fairness’ so much as the appearance of fairness that drives the psychology of prices.Read more at location 1915
It was like pulling the strings on a marionette. Huber and Puto found they could make the students want one beer or the other, just by adding a third choice that few or no one wanted.Read more at location 2450
‘This has been a strategy that goes back to the seventeenth century,’ Paco Underhill said recently. ‘You sold one thing to the king, but everyone in court had to have a lesser one. There’s the $500 bag in the window, and what you walk away with is the T-shirt.’Read more at location 2482
consultants often find themselves in the position of scolding clients for setting their prices too low. ‘Luxury goods prices are not directly linked to any type of costs,’Read more at location 2528
Thaler deduced that marketers should devote less energy to promoting how absolutely wonderful their product is, and more to breaking it down, feature by feature, or selling several products in one bundle.Read more at location 2715
One gimmick of property entrepreneurs is to list a property for a short time at a very high price, then cut it to a more reasonable asking price, consistent with the seller’s and agent’s patience. Thereafter the listing can ‘honestly’ mention the original price (REDUCED FROM $X). This tactic adds only a few days to the time the house is on the market, yet it likely gets most of the benefit of the anchor price.Read more at location 3193
‘Anchoring is not a curiosity,’ Daniel Kahneman said. It ‘works quite well in negotiations, where getting in your number first gives an advantage.’ For bargainers, this simple rule may be the most important and easily applied finding of the psychology of price.Read more at location 3210
Union leaders wanting to sell a contract to the rank and file—or management wanting to sell a proposal to the union—should think carefully about how they describe the offer. The trick is to present the contract as minimising risk.Read more at location 3601
Social dominance is a relative thing. The alpha male is the one who has more (females, money, power) than any other male around. Absolute numbers don’t matter so much. When two stags fight over a female, the goal is not a win-win solution. It is to do better than the other male does. Put that in the context of the ultimatum game: It doesn’t help to win 5 pence when a rival gets 95 pence. Better that neither should get anything. This is the perspective that testosterone promotes.Read more at location 3888
‘Consider the opposite’ is easy to apply. When a dealer, seller, agent, or employer quotes you a figure, take a deep breath, and don’t make any commitments until you’ve had a chance to think of reasons why that price might be unreasonable. Make a game out of it: try to think of as many reasons as possible. Many hard-headed businesspeople dismiss such exercises in positive (negative) thinking. But anchoring is real, and we can use all the help we can get.Read more at location 4195
Bateson’s group alternated the posters weekly and counted each week’s money to detect any differences in payment behaviour. (They used milk consumption as a check on how much coffee and tea was actually dispensed.) On the average, they found, people contributed 2.76 times as much money when the eyes posters were up, compared to the flowers posters. ‘I was surprised how big the effect was as we were expecting it to be subtle,’ Bateson said. Workplace honesty switched on and off like a lamp.Read more at location 4380
people in a room with a mirror were less likely to cheat or display gender or race prejudice, more likely to be helpfulRead more at location 4388
‘When people are made to be self-aware,’ Bodenhausen said, ‘they are likelier to stop and think about what they are doing.’ That in turn can lead to ‘more desirable ways of behaving.’Read more at location 4389
Over the years, behavioural decision theorists have made an art form of devising clever preference reversals. I will close with one of Hsee’s. You have your choice of two equally fine chocolates. One is small and shaped like a heart. The other is big and shaped like a cockroach. Which do you prefer? Hsee has posed this dilemma to students and friends, finding that most choose the cockroach chocolate. The kicker is that when Hsee asks people which chocolate they would enjoy more, most admit it’s the smaller one, shaped like a heart.Read more at location 4465
