The+predictably+irrational+entrepreneur

https://sites.google.com/site/profcraigarmstrong/Home/the-predictably-irrational-entrepreneur

The predictably irrational entrepreneur?
== ||   In Dan Ariely's groundbreaking work on predictably irrational behavior, he shows how the introduction of a lesser alternative to two equally attractive choices influences people to choose the "superior" alternative. That is, when individuals are faced with a choice between two similarly appealing options (Ariely uses an all-expenses-paid weekend in Rome versus an all-expenses-paid weekend in Paris), the addition of a third option that is similar to one of the first two options (but slightly less attractive; "no free coffee in Rome") causes people to choose weekend in Rome. Similarly, offering a choice for subscribing to The Economist for a print-only option at $125 made the print-and-web subscription at $125 seem more attractive. When that inferior option was removed, the web-only subscription for $59 became more attractive than the combined subscription priced at $125. || ** Preferences flip! ** ||   ||= ** [|Figure 1] ** ||= ** [| Figure 2] ** ||= ** [| Figure 3] ** || I want to know if potential entrepreneurs can be influenced the same way in their decision making. I asked one group of entrepreneurship students to choose between an investment in a McDonald's franchise or a Burger King franchise. The data in Figure 1 show that most people preferred McDonald's as their franchise investment. I then asked the same question to the same group of students, but I added the option of a Burger King that //doesn't serve breakfast// (the slightly less attractive alternative to a regular Burger King franchise). Figure 2 shows that the students' preferences were unmoved by the addition of the third, inferior alternative. I then asked a //second// group of entrepreneurship students one question: would you prefer to invest in a Burger King, McDonald's, or Burger King that doesn't serve breakfast? Following Ariely's experimental results, the existence of the similar but slightly inferior choice of a Burger King with no breakfast should have influenced more people to choose the regular Burger King over the regular McDonald's. Figure 3 shows that this did not happen. In fact, one student seems to have preferred a Burger King with no breakfast service over the other seemingly more attractive choices (he or she would rather sleep in?).
 * ** What happens when you remove an option nobody wants? **
 * ** My experiment **

** Conclusions? ** == See also The predictably irrational entrepreneur Part II
 * Burger King is to McDonald's as Rome is to Paris (no)
 * People are rational and like McDonald's? (probably)
 * The option to own a Burger King franchise that does not serve breakfast is not an option "nobody wants." (Why?!) It ** should ** have flipped participants' preferences ** in favor of ** the Burger King that does serve breakfast.
 * The decision criteria for investing in a fast food franchise are different from the criteria for choosing an all-expenses-paid weekend in a European city. (How?) ||  ||   ||   ||
 * [[image:https://sites.google.com/site/profcraigarmstrong/_/rsrc/1269525241217/Home/the-predictably-irrational-entrepreneur/ChartExport%282%29.png?height=240&width=320 width="320" height="240" align="center" link="https://sites.google.com/site/profcraigarmstrong/Home/the-predictably-irrational-entrepreneur/ChartExport%282%29.png?attredirects=0"]] || [[image:https://sites.google.com/site/profcraigarmstrong/_/rsrc/1269525241217/Home/the-predictably-irrational-entrepreneur/ChartExport%283%29.png?height=240&width=320 width="320" height="240" align="center" link="https://sites.google.com/site/profcraigarmstrong/Home/the-predictably-irrational-entrepreneur/ChartExport%282%29.png?attredirects=0"]] || [[image:https://sites.google.com/site/profcraigarmstrong/_/rsrc/1269525241217/Home/the-predictably-irrational-entrepreneur/ChartExport.png?height=240&width=320 width="320" height="240" align="center" link="https://sites.google.com/site/profcraigarmstrong/Home/the-predictably-irrational-entrepreneur/ChartExport%282%29.png?attredirects=0"]] ||

** Click on this image to see Dan Ariely's TED presentation **>

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