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Kindle Notes & Highlights
I have been told by many people that I have an unusual way of looking at the world.
testing my new kindle touch
between conventional economics and behavioral economics. In conventional economics, the assumption that we are all rational implies that, in everyday life, we compute the value of all the options we face and then follow the best possible path of action. What if we make a mistake and do something irrational? Here, too, traditional economics has an answer: “market forces” will sweep down on us and swiftly set us back
We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate
most people don’t know what they want unless they see it in context.
36-inch Panasonic for $690 42-inch Toshiba for $850 50-inch Philips for $1,480 Which one would you choose? In this case, Sam knows that customers find it difficult to compute the value of different options. (Who really knows if the Panasonic at $690 is a better deal than the Philips at $1,480?) But Sam also knows that given three choices, most people will take the middle choice
So guess which television Sam prices as the middle option? That’s right—the one he wants to sell!
Gregg Rapp, a restaurant consultant, who gets paid to work out the pricing for menus.
He knows, for instance, how lamb sold this year as opposed to last year; whether lamb did better paired with squash or with risotto; and
One thing Rapp has learned is that high-priced entrées on the menu boost revenue for the restaurant—even if no one buys them. Why? Because even though people generally won’t buy the most expensive dish on the menu, they will order the second most expensive dish. Thus, by creating an expensive dish, a restaurateur can lure customers into ordering the second most expensive choice (which can be cleverly engineered to deliver a higher profit margin).
we not only tend to compare things with one another but also tend to focus on comparing things that are easily comparable—and avoid comparing things that cannot be compared easily.
example of going to a bar witb ugly guy
But suppose you were offered a third option: Rome without the free breakfast, called -Rome or the decoy.
makes Rome with the free breakfast seem even better.
would push my participants to choose the similar but undistorted picture. In other words, would a slightly less attractive George Clooney (–A) push the participants to choose the perfect George Clooney over the perfect Brad Pitt?
