Lesson 4 Everyday Decisions
Why You Buy What You Buy
Good afternoon, students. Today, I’d like to talk about a topic that ____ us all: Money!
Do you ____ that you spend money wisely?
The truth is that most ____ are not as rational as they think.
This is because ____ beings are easily influenced by psychological factors.
Let me ____ my point through the following examples.
The Anchoring ____
In 2010, Steve Jobs introduced the tablet computer to the ____.
During the presentation, he said, “We’re going to price it under a ____ dollars,” which most people assumed meant $999.
He went on to talk about the features of the tablet and continued to justify why the tablet was worth ____.
At the end, he said, “I am thrilled to announce to you that the pricing starts not at $999 but at just $____.”
The crowd went ____. The tablet suddenly seemed affordable to everyone.
He put the $999 price tag in people’s minds at the beginning so that the $499 ____ would seem a lot cheaper in comparison.
____ Jobs used something called the anchoring effect to his advantage here.
It works because people tend to rely on the ____ piece of information they receive when making decisions.
Let’s say ____ are shopping for a new jacket and the first one you see is priced at $100.
That’s too expensive, as you don’t want to spend ____ than $50.
Soon after, you see a similar jacket from a different brand with a $70 ____ tag.
You think it’s affordable, even ____ the price is still beyond your budget.
This is because the first piece of information acts as an anchor that influences your decisions ____.
Here’s another common example. Look at the ____ pairs of sneakers.
They both are $50, but the way their price is presented is ____.
Naturally, ____ are more drawn to the second pair.
This is ____ the original price serves as an anchor, making the discounted price appear more reasonable in comparison.
It is common for stores to use this ____ of price anchoring as a way to encourage purchases.
The Endowment Effect
____ let’s move on to another interesting effect.
In an ____, one group of students was given a coffee mug and a second group a chocolate bar.
Both groups were told they ____ exchange their items.
A third group wasn’t given anything and was told to ____ either a chocolate bar or a coffee mug.
This group showed an ____ preference for the two items.
About half of the group chose the chocolate bar, and the other half chose the ____ mug.
This suggested that roughly half of the first and second groups would ____ their items.
But that’s not what happened. Only ____ 10 percent of the students in the first and second groups were willing to make the exchange.
Why is this? This is because people value something more ____ they own it.
This is the basic idea of the ____ effect.
People are less likely to give up what they already have or trade it for something ____.
Companies ____ use the endowment effect as a marketing strategy.
For example, many media ____ companies offer free trials to customers.
Once customers use the free trial, they ____ ownership of that service, even if it’s temporary.
____, they are likely to value it more and are willing to pay to continue to own it.
A free-return ____ is another example.
Say that a company is offering free ____ on a smartwatch within 30 days of purchase.
It ____ like a good deal, since you can get a refund even after using the item.
But once you take this deal and establish ownership of the ____, it is unlikely that you will return it.
As ____ seen, our spending can be influenced by factors that appeal to our emotions and mind.
I hope this short lecture gave you a chance to reflect on your own spending and helped you understand the reasons behind ____ purchasing decisions.