What (probably) happened

Let’s look at the two texts again.

“It costs only $300 now!” — our friend.

“FYI today’s the last day of the sale. If you don’t want to miss out on getting 100 bucks off on the iPhone, consider buying it now because the next sale’s probably half a year away.”— our friend, putting his background in Behavioural Economics (BE) to use.

Behavioural Economics is the study of why we make decisions considered “irrational” as per traditional economics, and how decisions can be influenced

The second text uses two very well known BE principles:

1. Loss Aversion: We hate losing more than we like winning

The second text is about losing the deal (and not getting an iPhone), and we hate losing stuff more than we like getting stuff. In other words, the disappointment of losing $20 is more than the joy of winning $20.

2. Hyperbolic Discounting: Smaller-sooner rewards are increasingly better than larger-later rewards as the degree of “later” increases

“The next sale’s probably half a year away” was mentioned, and people hate waiting for rewards. It’s why new year resolutions are so difficult to live up to. Heck, getting $100 off immediately would be preferable to getting $150 off half a year later to several people, even though it may not be an economically “rational” choice.

See how the most basic knowledge of BE can help you influence decisions made by others, as well as reflect on those that are your own?

While the field is rich and has great depth, there’s a third BE principle that’s the subject of our blog post today (though our friend didn’t use it in this particular story):

3. Pygmalion/ Rosenthal effect: Higher expectations lead to better performance

Rosenthal — the psychologist after whom this psychological phenomenon is named — is famous for his landmark experiment in 1968.

Teachers at a school were led to believe some children were smarter than others, being told that certain students had “…unusual potential for academic growth.” The only difference between any of these children was, according to Rosenthal, “…in the mind of the teacher.” Eight months later, the children took tests and the children with the fake “potential” performed better.

A miraculous, self-fulfilling prophecy… that’s what mind games can do.

These principles are potential game-changers in the classroom. Here’s the infographic.