“Life is the sum of all your choices,” wrote Albert Camus. Unfortunately, just as we 
misjudge how happy we will be in the future, we misjudge how our fear of immediate loss hampers our future options. In this game recognize how that happens and make smarter choices:
Participants get $20 to place $1 bets on 20 tosses of a coin. Each losing bet costs $1. Each winning bet earns $2.50. Given the payout and the 50/50 chance of winning the smart behavior is to bet every time.
Yet most participants passed up several chances to place a bet. Why? Because fear mounts with each coin toss, making people less and less likely to take the gamble and potentially lose what they already have.
Hint: Those who can blunt their fear of loss, to rationally think of their options, win more. That’s easier to do when not multitasking or feeling distracted or rushed.
Three other ways we sabotage decisionmaking and how we can do better
- How Valuable Does it Appear to Me?
When people bought an energy drink at a discount, they actually performed worse on a puzzle-solving task than those who had paid full price for it. Why? Our unconscious belief equates low price with low quality.
Also when blind tasting wines, people most enjoy the ones they are told cost more.
“That suggests, for example, that drugs bought at a discount, such as drugs from Canada or generic versions of brand-name medications, might be less effective even when they’re otherwise identical,” observes Shiv. 
Hint: Charging a premium price for your product or service – and branding it as “deluxe,” “full-service” or other upscale characterization may increase buyer’s:
• Happiness with what they bought.
• Motivation to share their choice with others.
Also, context and habit trigger perceived value. Those moviegoers who usually eat popcorn while watching, for example, are less likely to notice its quality. Since much of our everyday activities are habitual, we can see why it is difficult to change, especially when we are distracted or rushed. Relatedly sampling in context influences behavior, including buying as I discovered in my Bon Bon Bombshell experiment.
Hint: Slow down to act smarter
1. Leave Room in Your Brain to Make the Smart Choice
Recognizing that emotional impulse can tempt us to pick that juicy-looking bacon hamburger over the salad, here’s Baba Shiva’s way to make the better choice. Participants, in his study, who are asked to memorize a seven-digit number were much more likely to choose chocolate cake over fruit salad than those who’d been asked to memorize only a one-digit number.
Hint: Those who had more brainpower left (less to remember) were better able to think about making the healthy choice.
3. Recover From Rejection
Did you get dumped? (We all have at some time). Compounding the pain, not only do we want something more when it appears to be scarce, we are more motivated to pursue the person or object we’ve lost.
Recognizing this tendency may enable you to blunt the effect of it. Plus we can be tempted to increase someone’s appreciation for us by not being readily available.
Here are more resources that have helped me be a smarter decider …. sometimes:
• How Groups Can Make Better Choices
• How to Nudge Others to Act “Right
• How We Sometimes Fool Ourselves When Making Decisions then read about what Zachary Shore describes as seven cognitive traps in Blunder. They include static cling (an inability to accept change), causefusion (confusing the causes of complex events) and flatview (black and white thinking).
• Shiva’s friend, Dan Areily describes other ways to make smarter choices in Predictably Irrational.
• For extreme examples of warped reactions read Shankar Vedantam’s story on how the heat of passion deeply alters behavior no matter how smart, rational or well-trained we are.
I agree with the premise of being certain you charge enough for your product/service. I actually increased the price of an informational PDF online and sales increased by over 20%.
Kare, – It is amazing how you continuously are delving into the issues of decision making leaving practically nothing uncovered, creating further opportunities for conclusions and future directions. Well a brief review of the behavioral decision – making literature shows peoples’ preferences to be highly malleable and systematically affected by a host of factors
not subsumed under the compelling and popular theory of choice. People’s preferences are heavily shaped, among other things, by particular perceptions of risk and value , by multiple influences on attribute weights, by the tendency to avoid decisional conflict and to rely on compelling reasons for choice, by salient identities and emotions, and by a general tendency to accept decision situations as they are described, rarely reframing them in alternative, let alone canonical, ways. An accurate description of human decision making needs to incorporate also other tendencies, often left behind as including a variety of other judgmental biases, as well as people’s sensitivity to considerations such as fairness. The refinement of descriptive theories is an evolving process; however, the product that emerges continuously seems distant from the elegant and optimal normative treatment. After all, normative theories are themselves empirical projects, capturing what people consider ideal: As we improve our understanding of how decisions are made, we may be able to formulate prescriptive procedures to guide decision makers, in light of their limitations, to better capture their normative wishes.
Of, course, there are instances in which people have very clear preferences that no amount of subtle manipulation will alter. At other times we appear to be at the mercy of factors that we would often like to consider inconsequential. This conclusion well accepted in psychology, is becoming increasingly influential not only in decision research, but also in the social sciences more generally , with prominent researchers in law, medicine, sociology, and economics exhorting their fields to pay attention to the findings of the sort that you review to a large extend in your(Kare) latest posts, in formulating new ways of thinking about and predicting behavior. Given the academic, personal, and practical import of decision making , such developments may prove vital to our understanding of why people think, act, and decide as they do.
Yet, being pragmatically oriented, I will share with you certain insights that I find very useful and practical:
– The overall success in life depends on several key issues of utmost importance, that can be easily described in the following sequence.
First – allow your feelings to perceive holistically the reality surrounding you in a concrete situation, that may have occurred.
Second – do not rush into hasty and not well thought through false decisions.
Third – be courageous enough to make a decisive decision.
Fourth – once you make up your mind and decide on something, act with confidence and without allowing yourself to be tortured by needless doubts.
Fifth – concentrate and back up you decision with all your strength, energy and moral.
Finally – don’t be afraid to make a mistake, but learn from it and don’t repeat it.
One of the most difficult things to do in business is trying to price something to give both the appearance of worth and value at the the same time. Consumers will not buy if an item is priced too low or too high and determining the best price point is challenging often times.