Viswanathan K's Thoughts

No matter what certain economists may tell you, you know that people aren’t rational in the choices they make. That is pretty obvious. And yet, we forget that every time we come up with a “rational” solution only to find that it ends up achieving a totally different and unexpected outcome, all because people aren’t rational! For example, there was this day care center in Israel that expected parents to pick up their kids by 4 pm. Sometimes, parents were late but not by much. Why? Because they had to interact with the teacher who had to stay late and thus felt apologetic and a bit guilty. An experiment was conducted to impose a fine for late pickups. The surprising consequence ? “In day cares where the fine was introduced, parents immediately started showing up late, with tardiness levels eventually leveling out at about twice the pre-fine level. That is, introducing a fine caused twice as many parents to show up late. What about the remaining four day care centers that remaine...

So many people complain about the difficulty in making decisions while shopping. Do you buy Brand X that gives 20% extra free? Or Brand Y that has 10% off? Or Brand Z that gives something else free with it? Do you buy that flat screen TV today or wait for the sale at Diwali? Now since the customer is king, shouldn’t companies be simplifying pricing choices? Like maybe offering consistently low prices all the time? Not so fast, as the US store, JC Penney discovered to its cost. Turns out that while people do complain about pricing choices, they are irrational. Also, they enjoy the thrill of the chase. Huh? The word “sale” acts like a siren call for many people: it lures them in to make that purchase. Consistently low prices don’t do the same. Besides, if a competitor lowers their prices just one time of the year, and Poof! Suddenly that low price claim becomes suspect in shoppers’ eyes. Then there are those sites that offer coupons: have lunch at Restaurant A on Wedne...