Predictably Irrational: The Hidden Forces That Shape our Decisions

Chapter 5 begins by explaining the two laws of demand, which are fundamental principles in traditional economics. The first law: Demand for an economic good increases at lower prices. The second law: Individuals will buy multiple units of the good when it is set at this lower price.

Ariely expands on this concept with “one of the most infamous acts of raw, unabashed, supply-and-demand capitalism in action” (103): the “Running of the Brides” (103) at Filene’s Basement, a department store that sells designer wedding dresses. One day a year, the store deeply discounts the dresses. As soon as the store opens, hordes of brides and their friends and families rush into the store and grab as many dresses as they can. Because the women can now afford these dresses, some women even buy multiple dresses. Traditional economists consider this behavior rational since it follows the two laws of demand.

Ariely presents several experiments that further explore how the mixing of social and market norms influence demand. Along with several colleagues, Ariely established another makeshift candy stand at MIT’s student center. In one study, they alternated selling Starburst Fruit Chews for one cent each and offering them free. In another study, they alternated selling chocolates at 10 cents, five cents, and one cent each.