Status quo bias
The status quo bias refers to our psychological tendency to stick to what we are doing , even if there are better options. The change requires some effort and there is a risk of regret for the decision made.
Some research on investment decision (example: Samuelson & Zeckhauser, 1988 ) shows how this type of cognitive bias works.
2. Post-purchase rationalization
Because of this cognitive bias we tend to convince ourselves that our purchase was a good thing , even if it was a mistake, in reality. We don’t feel very good when we make mistakes (have you heard of cognitive dissonance ?) And we can even value the wrong decision simply because it is our decision (example: Cohen et al., 1970 ).
3. The Relativity Trap ( Anchoring Effect )
We think about prices relatively , that is, comparing.
On Black Friday, for example, the famous “everything for half the price” was already very common. You can find a R $ 700 cell phone expensive, but you might find it cheap if its price dropped from R $ 1,400 to R $ 700. You can also find this cell phone VERY CHEAP compared to an iPhone, which costs about R $ 5 trillions of money ?.
A price can act as an anchor for our reasoning, hence the so-called anchoring effect .
How to overcome this trap of relativity?
Using… the comparison!
- How much work time would you spend to earn $ 700?
- How often would you go to the cinema?
- How many paçocas would you buy with R $ 700?
- Insert here any other thing that makes sense to you
Of course, the value you give to the object of purchase is private. Even at the same price, a smartphone can have different value for a geek and for an 80-year-old lady who just wants to make calls in the simplest way possible. That is why it is important that you make the price relative to other things that are of value to you.
4. Bias of the present
In general, we prefer to have pleasure now and leave the pain for later . This is called a hyperbolic discount .
In a study on food choice ( Read and van Leeuwen, 1998 ), 74% of participants chose fruits for the next week, while when choosing what to eat today 70% chose chocolate.
In the case of money, we can think of “buy now and start paying in 40 days”. Pleasure is immediate, suffering is postponed.
5. Familiarity bias
We tend to buy out of familiarity , even if there are other better options ( Richter & Spath, 2006 ), which is why advertising works so well. For example: we are more likely to buy more products from a brand that appears in television advertisements than from an unknown brand.
6. Rosy retrospection
We tend to remember our decisions as better than they really were ( Mitchell & Thompson, 1994 ). So we made the same financial mistakes again.
That word has almost magical power in marketing. Research in behavioral economics indicates that we can accept a worse option to get something for free ( Shampan’er, K., & Ariely, D., 2006 ).
8. Restriction bias
Do we have a lot of self-control over money? Some studies indicate that we are unrealistically optimistic in predicting how much we control ourselves in the face of temptations ( Nordgren et al., 2009 ).
What to do?
Avoiding stimuli is a good thing. For example: not having credit cards.