Thursday, February 28, 2008

Why we're having trouble with the markets...

Contrary to popular belief, having lots of choices can be more difficult to manage than limited choices. Producers trying to decide their crop mix and sales options are going crazy making decisions.This won't help. A simple game that illustrates the mixed blessing of multiple choices.


In fact, because of the prosperity raining down on parts of agriculture, I think you can count on some very irrational decisions being made.
What they saw was the power of expectations. People expect expensive wines to taste better, and then their brains literally make it so. Wine lovers shouldn't feel singled out: Antonio Rangel, the Caltech neuroeconomist who led the study, insists that he could have used a variety of items to get similar results, from bottled water to modern art.

Expectations have long been a topic of psychological research, and it's well known that they affect how we react to events, or how we respond to medication. But in recent years, scientists have been intensively studying how expectations shape our direct experience of the world, what we taste, feel, and hear. The findings have been surprising - did you know that generic drugs can be less effective merely because they cost less? - and it's now becoming clear just how pervasive the effects of expectation are.

The human brain, research suggests, isn't built for objectivity. The brain doesn't passively take in perceptions. Rather, brain regions involved in developing expectations can systematically alter the activity of areas involved in sensation. The cortex is "cooking the books," adjusting its own inputs depending on what it expects.

Although much of this research has been done by scientists interested in marketing and consumer decisions, the work has broad implications. People assume that they perceive reality as it is, that our senses accurately record the outside world. Yet the science suggests that, in important ways, people experience reality not as it is, but as they expect it to be. [More]
This is why vendors have astonishing pricing power right now. Even if we do pay through the nose for products that deliver few, if any benefits beyond the competition, our brains will make sure we think they do.

Get your buying done now, because the input inflation is just beginning to spawn in our brains, IMHO.

1 comment:

Anonymous said...

I scored over 2200 the first round and 2400 the second. I only switched 32 doors the first round and stuck with the open door the entire second round. Good lesson for the Bears next year- stick with the game plan!