1. BEHAVIORAL
ECONOMICS :
WHY CONSUMERS ARE
UNREASONABLE
SPENDERS

2. CONSUMERS DO NOT ALWAYS
MAKE RATIONAL DECISIONS
It's often assumed consumers always
make buying decisions based on costs and
benefits. It turns out personal biases and
habits often divert them from what would
seem to be rational thinking.

3. “In this field, we don’t assume that people are perfectly
sensible, calculating machines. Instead, we observe how
people actually behave, and quite often our observations
lead us to the conclusion that human beings are irrational.”
THIS TYPE OF CONSUMER BEHAVIOR LED TO
THE STUDY OF BEHAVIORAL ECONOMICS
-DAN ARIELY-

4. LET’S ELABORATE ON
WHAT BEHAVIORAL
ECONOMICS TELLS US,
BY LOOKING AT HOW
ANNIE SHOPS.

5. FIRST STOP: ELECTRONICS
Out of all laptops
with 1 TB storage,
she chose the one
that offered a 24-
month installment
plan.

6. Consumers love layaway or
installment plans because small
delays of payment make the
painful parting with your
precious cash more bearable.
ACCORDING TO
BEHAVIORAL ECONOMICS…
24-MONTH
INSTALLMENT PLAN

7. SECOND STOP: WALLETS
Annie fell in love with
so many chic leather
wallets that she got
confused. She
couldn’t pick one, so
she opted not to buy
any of them on this
trip.

8. ACCORDING TO
BEHAVIORAL ECONOMICS…
“Choice Overload” forces
consumers to think harder
before making a decision. This
reduces the likelihood of
purchase.

9. THIRD STOP: SOCKS
Annie walked past
her favorite sock
brand to choose
from the huge buy-
one-get-one pile.

10. ACCORDING TO
BEHAVIORAL ECONOMICS…
Consumers love the word
“free.” It magically evokes
positive feelings toward a
product.

11. FOURTH STOP: TOWELS
After comparing the
absorbency, fiber
content and style of
several different
towels, she narrowed
down her options to
two. Then she
decided to buy the
more expensive one.

12. ACCORDING TO
BEHAVIORAL ECONOMICS…
Consumers associate price
with product quality. The brain
apparently assumes that the
higher the price, the better
the quality.
HIGH
QUALITY

13. FIFTH STOP: CLOTHES
Annie checked out
the newest boutique
in town. She noticed
that their prices were
much lower than at
her favorite shop.
She purchased a
couple of blouses.

14. Once consumers have mentally
established a set price for a
particular product or product
type, their willingness to buy
similar items depends on this
“anchor price.”
ACCORDING TO
BEHAVIORAL ECONOMICS…

15. “It is true that from a behavioral economics perspective we
are fallible, easily confused, not that smart, and often
irrational. We are more like Homer Simpson than
Superman. So from this perspective it is rather depressing.
But at the same time there is also a silver lining. There are
free lunches!”
- Dan Ariely -

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