Your Customers, Employees, Managers and Stakeholders are all Irrational: Behavioral Economics




Cognitive Bias
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Jaap de Jonge
Editor, Netherlands

Your Customers, Employees, Managers and Stakeholders are all Irrational: Behavioral Economics

Most writers treat Cognitive Bias as a negative phenomenon that explains why humans (managers) are incapable of making rational decisions. In their view cognitive bias is frustrating rational decision-making.
Dan Ariely, Prof at Duke University, author of 'Predictably Irrational: The Hidden Forces That Shape Our Decisions', in last HBR is introducing another view and proposes to replace rational economics (based on the assumption that humans fundamentally make rational decisions and that the market's invisible hand serves as a trustworthy corrective to imbalance) by behavioral economics (based on the assumption that humans fundamentally make irrational decisions and are motivated by the invisible hand of unconscious cognitive biases).
In behavioral economics, customers, employees, managers and stakeholders are assumed emotional, myopic and easily confused and distracted. Experimenting with things such as bonus schedules, product pricing, consumer choices and employee behavior are crucial to predict behavior. Ariely warns that the BE process is time-consuming, delicate and may not always provide clear results apart from showing that our initial assumptions were wrong.
 

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Colin Downey, New Zealand
 

Human Emotions

Behaviours stem from the physical state of wanting to avoid pain and gain pleasure. Many decisions b... Sign up

 
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Gonca Telli Yamamoto, Turkey
 

Economically People are Rational in General

It is important to take care of cognitions for managers of companies or other institutions. As econo... Sign up

 
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Judy Nelson, USA
 

Behavioral Economics

I've been thinking a lot about the BE article since I first read it. The continuing revelations of b... Sign up

 
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Gill, UK
 

Not Economically Rational

If you read Dan's book and his experiments, you will see that customers are not rational even econom... Sign up

 
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Ronald Gross, United States
 

Cognitive Behavior in Money Management

I believe most members will find "The Seven Deadly Sins of Money Managers" written by James Montier ... Sign up

 
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Richard Cushing, USA
 

Going for the Gain

Dan Ariely should read Ludwig Von Mises' HUMAN ACTION, if he has not done so already. Human beings w... Sign up

 
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Zen, USA
 

Cognitive Capacity

There is a new trending of awareness in this arena. I've witnessed how 'present' conversations trans... Sign up

   

More on Cognitive Bias:
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Cognitive Bias
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