Predictably Irrational by Dr. Dan Ariely Read Free Book Online Page A

presented our participants with three different sounds, and following each, asked them if they would be willing to get paid a particular amount of money (which served as the price anchor) for hearing those sounds again. One sound was a 30-second high-pitched 3,000-hertz sound, somewhat like someone screaming in a high-pitched voice. Another was a 30-second full-spectrum noise (also called white noise), which is similar to the noise a television set makes when there is no reception. The third was a 30-second oscillation between high-pitched and low-pitched sounds. (I am not sure if the bankers understood exactly what they were about to experience, but maybe even our annoying sounds were less annoying than talking about investment banking.)
    We used sounds because there is no existing market for annoying sounds (so the participants couldn’t use a market price as a way to think about the value of these sounds). We also used annoying sounds, specifically, because no one likes such sounds (if we had used classical music, some would have liked it better than others). As for the sounds themselves, I selected them after creating hundreds of sounds, choosing these three because they were, in my opinion, equally annoying.
    We placed our participants in front of computer screens at the lab, and had them clamp headphones over their ears.
    As the room quieted down, the first group saw this message appear in front of them: “In a few moments we are going to play a new unpleasant tone over your headset. We are interested in how annoying you find it. Immediately after you hear the tone, we will ask you whether, hypothetically, you would be willing to repeat the same experience in exchange for a payment of 10 cents.” The second group got the same message, only with an offer of 90 cents rather than 10 cents.
    Would the anchor prices make a difference? To find out, we turned on the sound—in this case the irritating 30-second, 3,000-hertz squeal. Some of our participants grimaced. Others rolled their eyes.
    When the screeching ended, each participant was presented with the anchoring question, phrased as a hypothetical choice: Would the participant be willing, hypothetically, to repeat the experience for a cash payment (which was 10 cents for the first group and 90 cents for the second group)? After answering this anchoring question, the participants were asked to indicate on the computer screen the lowest price they would demand to listen to the sound again. This decision was real, by the way, as it would determine whether they would hear the sound again—and get paid for doing so. *
    Soon after the participants entered their prices, they learned the outcome. Participants whose price was sufficiently low “won” the sound, had the (unpleasant) opportunity to hear it again, and got paid for doing so. The participants whose price was too high did not listen to the sound and were not paid for this part of the experiment.
    What was the point of all this? We wanted to find out whether the first prices that we suggested (10 cents and 90 cents) had served as an anchor. And indeed they had. Those who first faced the hypothetical decision about whether to listen to the sound for 10 cents needed much less money to be willing to listen to this sound again (33 cents on average) relative to those who first faced the hypothetical decision about whether to listen to the sound for 90 cents—this second group demanded more than twice the compensation (73 cents on average) for the same annoying experience. Do you see the difference that the suggested price had?
    B UT THIS WAS only the start of our exploration. We also wanted to know how influential the anchor would be in future decisions. Suppose we gave the participants an opportunity to drop this anchor and run for another? Would they do it? To put it in terms of goslings, would they swim across the pond after their original imprint and then, midway, swing their allegiance to a