The first experiment students had to take

The
Fallacy Supply And Demand2nd
chapter In this chapter author
tries to answer these kind of questions: “Do our first impressions and
decisions become imprinted? In addition, if so, how does this imprinting play
out in our lives? Moreover, more importantly, does that price (which in
academic lingo we call an anchor) have a long-term effect? Could it be that
we made arbitrary decisions at some point in the past and have built our lives
on them ever since?”1Main idea of this chapter
revolves around idea of “Arbitrary
Coherence”. ·        
This idea is based on Anchoring Effect. The effect in which
initial decisions (arbitrary) influence later actions (coherence). There were
done two experiments social security numbers and annoying music sounds. In first
experiment students had to take last two digits of social security numbers as
price and they were asked would you pay for this item the number that they
wrote. Then they had to write maximum price that they pay for the same item. It
turned out that people with higher security number set higher prices than the
people with low security number. In second experiment researchers found that
even the anchors change, first anchor will affect more to your future
decisions.·        
Self-herding
is also one version of “Arbitrary Coherence”. We will
often go to restaurant, because people suggested it or go to movie because it
is popular. This is called “herding”. Similarly, self-herding can be explained
in this way. You make initial choice it can be arbitrary. If you had a good
experience, you are going to make that choice again. For example: you
accidently you go to Starbucks. You get coffee, cool
music, great service. Even it is more expensive than Dunkin’ Donuts, you set
new anchor for price of coffee by self-herding.·        
Thirdly, he wanted to try the
experiment with “a win-win outcome”.
He tried not only manipulate anchor, but manipulate it so much that people
willing to pay for it. So after poetry reading he asked half of students how
much they would pay for my reading of poetry, from another half he asked how
much he they want to get paid for hearing him. Both bit some money, but neither
of groups asked why they must pay or must be paid. They just took arbitrariness
of paying or being paid. By the end of the chapter there is written
how we can avoid falling into mistakes of irrational thinking from arbitrary
and its coherences.·        
The first thing is thinking about
our habits. You must ask yourself
cost of the habits that you are making·        
The second thing is asking how much
pleasure are you getting·        
One choice may be beginning of
series of other choices. That is why you must be objective by asking yourself
how much you want and what actually you really want. He ends this chapter
comparing prices of traditional economics with arbitrary coherence prices using
supply and demand. Moreover wrote problems of free market, trades and utility. 

1 Predictably Irrational, Dan Ariely, An Imprint of
HyrpercollinsPublishers, page 25

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