Predictably Irrational Summary

Why do perfectly rational people act irrationally every day? Dan Ariely unveils the predictable patterns behind our seemingly unpredictable choices.

1. Comparison Drives Our Decisions

Our decisions often hinge on comparisons, even when they don't make much sense. Humans naturally compare things to evaluate their worth — whether it's evaluating potential partners, deciding what to buy, or ranking salaries. However, these comparisons are often based on arbitrary or irrelevant factors, creating distortions in our perception.

Marketers exploit this tendency to influence our spending. For example, a restaurant might add an overly expensive dish to its menu. Although the dish is rarely ordered, it makes other high-priced items seem more reasonable in comparison. Similarly, in the dating world, someone might seem more attractive when standing next to a nearly identical but slightly less appealing counterpart.

While comparisons can help us make decisions, they also make us dissatisfied. After all, when you're constantly comparing what you have versus what others have, it's easy to feel envious or unfulfilled. The cofounder of HotorNot.com even sold his Porsche after realizing it only made him yearn for a better car, like a Ferrari.

Examples

• Choosing a dish at a restaurant based on how it's priced compared to others.
• At clubs, people notice someone looks better when compared to a less-attractive friend.
• Constantly comparing salaries leads many people to feel undervalued at work.

2. The Allure of "Free"

When we see the word "free," our ability to think rationally evaporates. Researchers find that we value free items far more than their actual worth, simply because there is no downside or risk involved in acquiring them.

For instance, in a chocolate study, most participants initially chose higher-quality Lindt truffles over cheaper Hershey’s Kisses. But when the Hershey’s Kisses became free — and Lindt truffles offered at a slight discount — people gravitated toward the free Hersheys, despite its inferior taste. This shift is explained by the "zero price effect," where an item's removal of cost makes it disproportionately appealing.

Companies harness this instinct to drive our behavior. For example, Amazon encourages larger purchases by offering free shipping once a specific spending threshold is reached. Governments could also leverage this by offering free health services, rather than discounted ones, to encourage preventive care.

Examples

• Customers opt for free shipping at Amazon, even buying additional items they don’t need.
• Attendees fight for free promotional items at events, regardless of their usefulness.
• People choose inferior chocolate when it's positioned as free versus discounted.

3. Anchoring Alters Our Perception of Value

The first number you hear can drastically shape your perception of what something is worth. Known as anchoring, this psychological quirk leads us to base future value judgments on the first available price, even if it's arbitrary.

For example, when a new product like a smartwatch hits the market, consumers don't know how much it's worth. If the first price they hear is $500, they’ll assess discounts like $400 as a great deal, while $600 seems outrageous. Even seemingly unrelated figures can influence anchoring — such as using one’s social security number before bidding on items at an auction. Higher numbers correlated with higher bids.

This principle explains why initial prices matter in negotiations or product launches. Once a line is drawn in a customer’s mind, shifting their perception is difficult.

Examples

• Setting a perceived “deal” price after an initial anchor, such as discounts on electronics.
• Social security digits affecting auction behavior, as seen in research studies.
• Restaurants increase holiday menu prices, establishing higher baseline expectations for others.

4. We Overestimate the Value of What We Own

Ownership plays a huge role in how we value things. Once we possess something, its value is magnified in our eyes. Known as the endowment effect, this psychological bias causes sellers to inflate prices while buyers undervalue the same items.

Students at Duke University demonstrated this when lottery-drawn basketball tickets drastically changed value—those who won tickets demanded thousands, while non-winners refused to pay over $170. Owners felt attached to their tickets, imagining the rewarding experiences they would lose, while buyers simply didn’t feel that same emotional attachment.

This skewed valuation happens in everyday life, from sentimental pricing on homes to haggling for personal items. It also extends to opinions — people resist changing views they’ve invested effort in because they feel ownership over those beliefs.

Examples

• Duke students refused to sell lottery tickets for less, overestimating their worth.
• Homeowners price houses highly due to emotional memories, ignoring market norms.
• Debates get heated when people feel personally tied to their opinions.

5. Expectations Shape Experience

Expectation directly influences how we perceive and experience the world. People judge products, services, and even taste based on preconceived assumptions rather than reality.

Take the "Pepsi vs. Coke" experiment. In blind tastings, participants preferred Pepsi. However, when labeled, Coke won — not because of its flavor, but due to people’s expectations of the brand. Similarly, pricey medications seem more effective than cheaper ones, even when they’re chemically identical. The placebo effect drives this — we believe effectiveness correlates with price, triggering a stronger response.

Marketers exploit these biases by creating high expectations around luxury goods or exclusive products, while researchers caution this effect also impacts societal stereotypes.

Examples

• Expensive wines and medications perceived to "taste" or "work" better.
• Labeling altered results in Coke versus Pepsi taste tests.
• Stereotypes in word associations influence behaviors like slower walking after reading “elderly.”

6. Mixing Social and Market Norms Often Backfires

People operate under two distinct norms: social norms, where kindness and favors dominate, and market norms, driven by transactions and monetary value. Mixing the two creates problems.

Consider why offering your mom $50 for a lovingly prepared Sunday dinner feels insulting. That act mixes cold financial logic with the warm social bond of family. Similarly, when lawyers were asked to work at reduced rates for retirees, they mostly declined. When asked to do the work completely for free, many agreed. Introducing small amounts of money shifted the exchange from social to market norms.

Understanding this divide helps in relationships, leadership, and outreach. Donations and charity campaigns, for example, often appeal to social norms, while bottom-line negotiations invoke market norms.

Examples

• Paying mom for dinner blurs social bonds with financial transactions.
• Free legal aid sparked generosity, but discounted rates had fewer takers.
• Offering a hug as payment evokes social norms, whereas cash keeps interaction professional.

7. Dishonest Choices Are Small but Common

Most people wouldn't rob a bank, but they might take a Coke out of the communal fridge or exaggerate a little on a quiz score. Dishonesty is rarely dramatic; it frequently consists of small acts people rationalize away.

In a study, participants self-graded their test results for monetary incentives. Many exaggerated slightly, but the extent of cheating didn't escalate even when there was no chance of being caught. People remained hesitant to outright lie because they still wanted to see themselves as honest.

Interestingly, thinking about morality beforehand reduces dishonesty. When participants were asked to recall the Ten Commandments before similar tasks, their cheating vanished — as ethics became top-of-mind.

Examples

• Employees rationalize taking office supplies as “compensation.”
• Reciting moral principles thwarted dishonesty entirely during studies.
• Quiz takers inflate their scores, without drastically abusing the system.

8. We Sabotage Long-Term Goals for Immediate Rewards

People often set ambitious long-term goals but fail due to impulsive cravings or procrastination. This parallels the struggle between Dr. Jekyll (rational self) and Mr. Hyde (emotional reactions).

For example, even college students, famous for procrastination, improve grades by setting intermediate deadlines rather than waiting for one big final due date. Similarly, pairing unpleasant tasks with short-term rewards — like watching movies while enduring medical treatments — helps people stay motivated.

Being honest about our weaknesses allows us to precommit to helpful routines or restrictions that prevent bad habits from derailing progress.

Examples

• Students scoring higher with self-imposed deadlines throughout a semester.
• Rewarding healthy behavior by pairing it with enjoyable activities.
• Impulse purchases derailing frugality.

9. We Cling to Options, Even to Our Detriment

Humans are terrified of closing doors, even when keeping options open doesn’t benefit them. This tendency costs time, resources, and focus that could go toward valuable pursuits.

A study revealed participants paid money to sustain irrelevant options during a digital game, foregoing larger prizes for maintaining choice. Whether it’s careers, education, or relationships, our unwillingness to decide wastes energy. However, as demonstrated by commander Xiang Yu in 210 BC, closing options can create clarity and force people to focus with greater determination.

Choosing what to leave behind is as critical as choosing what to pursue.

Examples

• Game study showed people sacrificing rewards for unused options.
• Hesitation between career paths leads to mediocrity in both.
• Commander Xiang Yu burning ships inspired unyielding commitment from troops.

Takeaways

1. Beware of irrelevant comparisons influencing your decisions. Focus on your own needs and goals.
2. Use precommitment strategies, like setting rules or deadlines, to stick to long-term plans.
3. Learn to close insignificant options that distract you from truly meaningful pursuits.