“Traditionally, economists considered everyone to be acting rationally, which led to rigorous-seeming curves that were easy to comprehend but in the real world rarely predicted actual behavior. It turned out that people don’t view their lives as a series of utility curves.”
"When economists were treating preference, price, and value as stable and absolute, Kahneman, Tversky, and other psychologists argued that in the human mind, everything is relative and depends on context. And when we say everything we really mean everything, from judgments of physical attractiveness to judgments of reference, price, and value. Almost all human judgments are made in relation to a reference point.
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“Our perception of, and reaction to, reality is subjective. How you feel about products, or even about your life, is at least as important, and probably much more important, than the product or your life’s objective characteristics.”
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the brain didn’t evolve to perceive reality as it is. It evolved to make approximations that are reliable.
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Coherent arbitrariness tells us that absolute preferences are volatile, but relative preferences are stable. This creates an illusion of order that disguises the largely arbitrary nature of how we value things.
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If we accept coherent arbitrariness, we should dismiss (or at least discourage) the idea that market price is solely determined by a balance between demand and supply. [Moi ici: Ehehehe subversão para cima da tríade] Just like the valuation of the man’s wealth depends on his wife’s sister’s husband, his willingness to pay for a product depends on his perception of fairness, not a cold calculation of what the product should be worth based on its market price. The behavioral economist would argue that even though market price is not entirely arbitrary - no one could get away with selling a six-pack of beer for one thousand dollars - how prices are framed and the context of the purchase significantly influence our willingness to pay.
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The second interpretation is that high and low anchors make us feel like we’re deciding rationally, even though we’re probably just responding to social pressures and loss aversion—we don’t want to be perceived as cheap, but we don’t want to get ripped off, so we opt for the middle option.
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in the luxury trade where expensive items that don’t sell change what does. Thus, if a retailer wants to sell a pair of shoes that cost $100, they should put them next to a pair of shoes that cost $150. That way, the retailer will activate the trade-off contrast principle, which says that if item X is clearly better than item Y consumers will tend to buy X, even when X is only better relative to Y—and potentially worse than comparable items.[Moi ici: Recordar o exemplo das conservas da Comur]
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Neoclassical economic models predict that customers weigh all the options rationally. In reality, when we encounter too much choice - just like we would in a shoe store - we tend to opt for items that we can justify. We talk ourselves into X because it looks better than Y."
