Dan Ariely's Predictable Irrational Summary

It is a common conception, in economics, that consumers are rational thinkers, and some economists go so far as to state that supply and demand are independent of each other: suppliers cannot influence the ‘willingness to pay’ of consumers. Dan Ariely proves this conception to not hold in our modern economy. He conducts various experiments with other researchers, with college students as participants, to supports his theory that consumers are irrational and that many factors outside the basic supply and demand model influence their decisions/actions.
In Predictable Irrational, Ariely begins with the conclusion that people always search for comparisons to make decisions become easier, but doing this leads us to sometimes include irrelevant factors that make us select the alternative that we would normally not have selected. When consumers do not know what they want, adding these irrelevant factors helps them decide on at least what they do not want. This goes further on to
prove Frederick Herzberg two- factor theory: dissatisfiers and satisfiers; consumers do not want product or experience that will cause them dissatisfaction. Though the absence of dissatisfiers is not a guarantee in deciding, it will ease the selection process. So, the best thing for businesses to do is for them to provide less satisfying alternative options, or put their product in comparison with competitors that have less satisfying products. This way, there is a higher probability for consumers to pick their products.
Ariely goes further to explain that herding (assuming something is good or bad based on other people’s previous behavior).
Just like in the textbook, this tackles on the fact that consumer decisions are based also on social factors such as reference groups. Social groups have a direct and indirect influence on consumer buying behaviors. For example, if a friend bought a laptop and the friend is associated with having good taste, the consumer will most likely buy the same laptop, if he/she is shopping for a new laptop, because the laptop has already been associated with displaying good taste. Additionally, the second step of the consumer buying decision process is information search. In this step, information sources available to consumers are varied and include the personal category which is family, friends, etc. Therefore, when consumers are looking to buy a product they ask their friends and family about their opinion, and whether the opinion is good or bad, they associate it with the
product.
Dan Ariely uses the ‘eBay effect’ to again emphasize the irrationality of consumers. The ‘eBay effect’ is when people begin to feel ownership even before we own something. Experimental category (when consumers handle or use the product, like a trial period) is part of the information search step in the consumer buying decision process. Kotler states that this category is one of the most effective for consumers in obtaining information. Using the idea of eBay effect and consumer preference in using the experimental category when searching for information, businesses most efficient and effective way of getting consumers to purchase their products is for them to offer trial periods because when consumers use the products for days, they are more likely to get attach to it and less likely to give it up, as they value it more now and think of the potential cost of restarting a new search for similar products.
Finally, Ariely does an experiment to conclude how procrastination also affects consumers’ behavior. Does who do not have a deadline for something are less likely to get the job done in time. This again reinforces Kotler suggestion: business should provide consumers “with better information about the time they first used the product or need to replace it” (Kotler 103). If businesses do not provide consumers with suggestions on when to replace a product, they will most likely never replace it unless it becomes damage. This will, therefore, decrease sales which are not beneficial to a company.