If you stop acting automatically, you can avoid many unreasonable expenses.
According to classical economic theory, people act rationally and make the most beneficial decisions for themselves. But behavioral economists disagree. They believe that it is impossible to ignore the peculiarities of the human psyche.
Our mind works according to its own laws, which can hardly be called logical and rational from an economic point of view. Therefore, today we will talk about the traps into which our own mind drives us. Try to avoid them as much as possible.
- Fear of loss
We are much more afraid of losing something than we are happy to acquire a new one.
Try to imagine which news will impress you more – that you received a salary increase or that this year you will not be given the expected bonus? Experiments confirm that we experience loss more strongly.
Remember the website of any course, where every now and then the message “Only 10 places left” appears. We are afraid to miss the opportunity and make an impulsive purchase .
- Status Quo Bias
This effect is partly related to the previous one: we are psychologically comfortable when things remain unchanged. The thing is that any changes, even positive ones, are stressful.
We would rather stay with our tit in our hands than try to change something.
Answer a simple question: how often do you change your mobile operator? Over time, the tariffs of the old operator grow, and more and more profitable offers for new customers appear on the market. But we stubbornly continue to endure the disadvantageous, but familiar old.
This can be explained by the reluctance to understand the intricacies of the connection. But numerous psychological experiments have proven that the true reason for such behavior is the fear of being in a stressful situation, even if there is a reward in the end.
- Barnum effect
Think about the last time you read a horoscope. Even if you do not believe in all these predictions, did it not seem to you for a second that they partially describe your life? If yes, then you have fallen into Barnum’s trap.
The bottom line is that most people tend to attribute generic and vague descriptions as a characteristic of their personality and life.
As you probably already guessed, astrologers, fortune-tellers and other “predictors” use this effect to the fullest. The problem is that all the formulations from horoscopes are applicable to almost all people without exception: “you are a responsible person, but sometimes you can make mistakes”, “you like to have fun”, “good news awaits you”. The more positive the descriptions, the more matches we find.
- Money illusion
We tend to perceive the nominal rather than the real value of money . In other words, we are attracted to large numbers, although the purchasing power of money (how many goods you can buy for a certain amount) is much more important.
When your boss announces a pay raise, you are happy that you started earning more . But you hardly think about inflation, which “eats” all your increase. With the new salary, you can buy fewer goods than with the old one last year. Your financial condition has not changed in any way.
But the very fact of a salary increase is very important for a person, because nominally he has become richer.
- Snap effect
This is our tendency to evaluate numbers in the direction of the initial approximation. We evaluate the value of a thing based on the price quoted by the seller, and do not try to independently decide whether it is fair or not.
This effect is especially pronounced in stressful situations.
You decide to rent an apartment, the landlord names his price. You start trading based on this figure, although it is quite possible that objectively it is doubled. But our thinking fails us, and we psychologically cling to this anchor.
- Possession effect
We tend to overvalue our property. It doesn’t matter if you actually own the item. The main thing is to feel it for yourself.
You have probably come across this effect in your life if you have been to the market at least once. There, sellers by hook or by crook convince you to hold the thing in your hands, try it on.
As soon as you subconsciously feel the thing as yours, you are ready to buy.
However, there is an exception to this rule – experienced collectors. They are interested in getting the maximum benefit, are ready for an exchange and are more rational in choosing their purchases.
- The drowned cost trap
Another feature of our psyche is a desperate unwillingness to abandon a losing business and move on. It is psychologically difficult for us to admit our losses, so we continue to invest in unprofitable stocks or building a house, because so much effort and money has already been spent.
The effect of drowned costs is manifested both in business and in everyday life. The example of General Motors is illustrative: the management believed that Americans would actively buy copies of Japanese cars. And despite the fact that sales clearly indicated otherwise, they continued to release a loss-making product for years. The situation changed only with the change of the management team.
Or an example of the same trap in a typical everyday situation: the wife does not leave her unloved husband , because “they have already lived together for so many years.” As a result, an unhappy marriage and unwillingness to admit the obvious.
- Anticipation effect
The more we look forward to something, the more we want it. The very fact of waiting, intrigue adds value to the product in our eyes.
A vivid example is the presentation of new iPhones, which the company’s fans look forward to every time. However, this effect also has a downside: with each repetition, its strength weakens. The excitement around new models is getting weaker. If earlier people queued up in front of the door to the store for several days, then gradually this event is perceived more and more calmly.