That’s Irrational! The Weird Ways Consumers Behave and Why

Economic theory has some fundamental assumptions underpinning it. One of the most important is that people behave rationally. In other words, that the decisions we make are designed to fulfill our best interests.

But we know this is not always the case.

We sometimes make impulse purchases when standing in the checkout line, or when browsing on Amazon, for example.

Or, we may be willing to pay more for a product if we perceive we are getting a bargain.

A great deal of marketing is built on psychological principals. The study of behavioral economics considers when, why and how human psychology causes our decisions to stray from being rational.

A Look at Behavioral Economics

According to Psychology Today, “behavioral economics combines insights from the fields of psychology and economics to elucidate decision-making, with an eye towards outcomes that might be deemed irrational in some frameworks (including classic economic theories).”

Many marketers look to behavioral economics in their marketing strategies. In an article for AdWeek, John Walsh and Valérie Keller-Birrer discuss using behavioral economics in digital marketing to entice consumers. In it, they discuss several concepts from this field.

Decision Paralysis

While we typically think consumers like choices, too many choices might be counter-productive. It can lead to information overload and potentially result in no decision being made at all—i.e., no sale! This is an important consideration when creating your offer. Make it too complicated and require too many decisions and you’re likely to lose out on the sale.

Scarcity Principal

When something is scarce it is perceived as being more valuable. Walsh and Valérie Keller-Birrer note that while seeing relatively few remaining items on a store shelf can demonstrate scarcity, online retailers often create the same effect through counts showing limited quantities or a narrow window of time in which to purchase.

Trivago has brought up this point related to the practice of online hotel booking sites that warn “only one room remains” to prompt a booking decision.

And, of course, we see the effect of this virtually every year during the holiday season as parents frantically try to track down the in-demand toy of the season.

Endowment Effect

The endowment effect is when we place an irrationally high value on something we currently own. People are often willing to pay more to keep something than they would be willing to pay to acquire that same thing.

Decoy Effect

Consumers often have a change in preference when deciding between two options when presented with a third option that is less desirable than the first two. The decoy effect uses additional choices as a way to nudge consumers toward the marketer’s desired selection. Popcorn pricing at the theater is a great example of this theory in practice.


Behavioral economics helps explain why humans don’t always act rationally the way classical economics assumes they will. If you feel like enticing someone to make an irrational decision smells a bit unethical, you’re not alone, and industry experts have proposed some ethical guidelines when utilizing the principles of behavioral economics.

Finally, a couple of my favorite authors in this area for recommended reading: Dan Ariely and Steven Levitt.

About Us

Strategic Communications, LLC, works with B2B clients to help them achieve their goals through effective content marketing and management with both internal and external audiences. We work with clients to plan, create and publish high-quality, unique content. Whether on- or offline, or both, we’ll help you achieve desired results.

(Strategic Communications is certified as a Woman-Owned Business Enterprise through the Wisconsin Department of Administration.)

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