Consider the following scenario:
You have two cars, one is a very inefficient van (giving you on average 5 MPG) and one is a relatively efficient sedan (giving you on average 20 MPG). Due to your work and obligations you have to drive each of them the same distance every month. (more…)

I recently came across this article in the New York Times that describes a new movement among doctors and hospitals to admit their mistakes rather than continue with the more traditional approach of denying and defending them. As a result, the article suggests, these hospitals are seeing a decline in lawsuits and legal costs. I suspect that this has something to do with the fact that in these hospitals the patients are being treated with an approach that is usually reserved for meaningful, social relationships.
(more…)

Given that we recently celebrated our 10 year anniversary, I started wondering about what can predict long-term compatibility …

Reactions are welcome.

Don’t take this too seriously!

Here is my attempt at a “Cosmo” like quiz for your rationality / irrationality.

Irrationally yours

Dan 

When the server drops off the check at the end of a meal, people often scramble to figure out the norms for payment. Do we each pay for what we ordered? Do we split the bill evenly even if John had that extra glass of wine and the crème brûlée?
Luckily, findings from behavioral economics can help answer this burning question. It turns out that one person should pay the entire bill, and that the person paying should alternate over time. Here is the reason: (more…)

Dear Irrational,

A practice I often noticed on the I-90 in New York State (Or I-25 where I now live) is that people speed on the highway until they see a police officer with a speed gun (or with flashing lights writing a ticket to some poor driver on the side of the road), and then they slow down and drive at the speed limit for a while. (more…)

Jennifer Sharpe knows how to sell Girl Scout cookies. In fact, she managed to sell 17.323 boxes for $3.50 each! (see full story)

As she said: “I know how to get people to buy more,” said Jennifer, a sophomore at Edsel Ford High School . “If they buy two boxes and they hand me a 10, I’d be like, ‘For 50 cents more, you can get three”

Why is this trick likely to work (it reminds me a bit of the movie paper moon)?  Why is it likely to work better than simply offering people to buy 3 packages for $10.50

First, it is possible that making an initial offer below $10 (compared to one above $10) causes more people to be willing to buy — so it increases the market size.

Second, it is possible that once people had out their $10 they don’t think about the change they are about to get and as a consequence Jennifer’s offer of “just another 50 cents” does not register as another $3.50 for another box!

In any case, I suspect that Jennifer’s trip to Europe (which is what she collected the money for) will give her new ideas about new approaches to framing.

The market for medicine is incredibly interesting. Almost every day we learn something new about a treatment that we thought would work but does not, or about a treatment that we didn’t think would work but does. Beyond the particular fascination, I think that the medicine market can also teach us important lessons about rationality, economics, and by analogy, also about the stock market. (more…)

Dan,

My son (9 years) and I are huge fans of yours.
We have both read your book and gotten hours of pleasure discussing your experiments with friends and family.

My son came up with an interesting example of irrationality I would like to share with you: Every morning, I take him to school via subway from downtown Manhattan to the Upper Westside. We take the D train to Columbus Circle then switch to the 1 train headed uptown. He noticed that when switching, we leave the D train, walk to the 1 train platform, and then if we see that the train is there or just arriving, we immediately start running to catch the train. (more…)

In my mind we have learned three main lessons in these two sub-fields: 1) that the environment has a large, yet unrecognized, effect on our behavior, 2) that our intuitions about what drives our behaviors are flawed, 3) and that emotions play a large role in our decision making. Let me give some examples. (more…)