Predictably Irrational: Maybe Our Decisions Aren’t as Rational as We Think
Predictably Irrational: Maybe Our Decisions Aren’t as Rational as We Think
We like to believe that we make decisions. We compare prices, evaluate alternatives, calculate whether something is worth it, then we make a decision.
Least that is how we like to think about ourselves.
While reading Predictably Irrational by Dan Ariely I kept coming back to a slightly uncomfortable question:
What if we aren't actually making decisions based on what something's worth?
What if we are making decisions based on what it's being compared with how it is presented what other people are doing and sometimes even whether it is free?
That is the idea behind Predictably Irrational.
I found it particularly interesting because it sits right at the intersection of psychology, marketing and consumer behaviour.
We Don't Really Know What Things Are Worth
One of Ariely’s strongest ideas is relativity. We rarely judge things in isolation, we judge them against something
Think about a product priced at ₹4,999. Is that expensive? There isn’t enough information to answer.
But now imagine the same product is shown next to:
₹9,999 → ₹4,999
Suddenly ₹4,999 feels reasonable, maybe even like a bargain. Nothing about the ₹4,999 product changed. Only the reference point changed, this is why pricing is not about putting a number on a product. It is about deciding what that number will be compared against. This is where marketing becomes interesting.
The Power of an Anchor
Suppose a company introduces three subscription plans:
Basic. ₹199
Premium. ₹499
Pro. ₹999
A customer might immediately compare ₹499 with ₹999, Suddenly ₹499 does not feel particularly expensive.
Now imagine the company adds another plan:
Enterprise: ₹2,499
The ₹999 option can start looking more reasonable, the interesting part is that the customer did not necessarily become more price‑sensitive or less price‑sensitive. The comparison set changed.
This is anchoring.
Once I started looking at it this way I began noticing it everywhere.
Ø Discounts.
Ø Premium plans.
Ø Luxury products.
Ø Restaurant menus.
Ø Salary negotiations.
Ø Even career decisions.
We don’t always ask:
"Is this objectively good?”
We often ask:
"Is this better than the alternative I am looking at?”
That is a different question.
Then There Is the Word "Free”
Ariely’s discussion of zero cost is probably one of the ideas to see in everyday life.
Consider:
Premium chocolate. ₹20
* Chocolate. ₹1*
You might reasonably choose the premium chocolate.
Now change the prices:
Premium chocolate. ₹19
Chocolate. FREE
Suddenly the free option becomes much more attractive. The difference is ₹1, psychologically it does not feel like a ₹1 difference, because free feels different.
There is no perceived risk. No possibility of wasting money, no feeling that you made the purchase.
This explains why businesses are so comfortable using:
* Trials.*
Free delivery.
Free samples.
Freemium plans.
The word free can change the decision itself, not just the price.
And This Is Where Marketing Gets Interesting
A product manager might think:
"How do I make this product better?”
A marketer might ask:
"How do I communicate its value?”
Behavioral economics adds another question:
"What psychological environment will the customer make the decision inside?”
That question is much more interesting to me.
Because the customer is not entering a neutral decision‑making environment.
They see:
₹9,999 crossed out.
They see:
4.8 ★ from 20,000 customers.
They see: Only 2 left, time offer and Most popular.
None of these necessarily change the underlying product. They can change how the product is perceived.
We Also Don’t Behave the Way All the Time
Another idea that stood out to me was the difference between our calm state and emotionally aroused state. When we’re calm we are surprisingly confident about how we will behave, “I will not spend that much.”, “I will stick to my diet.”, “I will study tonight.” or “I will not make a decision.” ,then the situation actually arrives, Suddenly the decision looks different.
This is important because we often think of ourselves as having one personality making decisions. Our emotional state can change what seems reasonable, which means the person making the decision tomorrow may not behave like the person making the prediction today. That is not necessarily a lack of intelligence, it is a limitation of how we understand ourselves.
We Also Value Things More Once They Become Ours
Another concept is the effect, once we own something we tend to value it. Think about a concert ticket.
Before buying it you might decide:
“I would pay ₹1,500 for this.”
After buying it, selling it for ₹2,000 may suddenly feel like you are giving up something more valuable, the product did not change. Your relationship with it changed, Ownership creates an attachment. This is one reason businesses benefit from getting customers to experience ownership early, free trials can do this, subscriptions can do this, or personalized products can do this, Once something starts feeling like ours giving it up becomes psychologically harder.
The Uncomfortable Part: We Don’t Always Know Why We Do Things
This might be the lesson running through the entire book, we like to believe that we know our motivations. Sometimes we create explanations after making a decision. We buy something, explain why it was worth the money. We choose one option. Explain why it was the logical choice. We follow what everyone else is doing and tell ourselves it was simply the option. Sometimes that explanation may be true. Sometimes it may just be a story that makes our decision feel rational, this is where Predictably Irrational becomes more than a book about pricing. It is a book about self‑awareness.
What Does This Mean for a Marketer?
This is probably where I found the book most useful. A consumer does not walk into a marketplace with a spreadsheet.
They bring: biases, emotions, habits, social influences, expectations, experiences and marketers operate inside that environment. So, understanding consumer behaviour is not about demographics. Knowing that your customer is:
23 years old, urban, earning ₹50,000 a month does not necessarily tell you how they will make a decision. Understanding their decision‑making environment might tell you more.
What are they comparing? What is the anchor? What does "free" mean to them? What are other people choosing? What expectations have you created? What happens when they are under pressure?
These questions can completely change how we think about a product.
The Bigger Takeaway
What I liked most about Predictably Irrational is that Ariely does not simply say:
“Humans are irrational.” That is not particularly interesting.
His argument is more useful: Our irrationality is often predictable.
If it is predictable then it can be studied, If it can be studied businesses can design around it or if businesses can design around it then we should probably become more conscious of how those designs influence us.
Because the time you see:
₹9,999 → ₹4,999
you might ask:
“Is this actually a good deal?” Or perhaps the more interesting question is:
“Good compared to what?” And that, for me is the real lesson of Predictably Irrational.
We like to think we are choosing between products. Sometimes we are actually choosing between frames.