Make the decision whether to buy and what to buy is more about mind than it is about math. Traditional economics teaches that choice is good, and the more choices the better. But behavioral economics has shown too many choices can confuse people and ultimately prove ineffective.
Decisions about to buy goods that have market prices depends by time, by situation, by culture but especially by psychology. According to economist Dan Arielly in yesterday’s London Guardian, the behavior that people have when purchase something, depends from sheer habit:
Orthodox economists don’t recognize habits. “They assume ordinary people do a constant cost-benefit analysis on everything they do. But actually, after you reach a decision, you say, ‘That’s the end of it!’— and just continue.”
- How can I ever make the right choice? Sometimes choice isn’t a good thing when is a choice we need to do between many products. In fact, an high choice is what don’t makes us willing to take a financial decisions. For instance, when we need to purchase a mobile phone or make a journey, we have an high range of choice to take consider.
- Strength of habit. The classic illustration of mental laziness we encountering when continue to buy always the same products, despite there is better choice. The strength of habit is a factor that rule our behaviour and that do purchase us the same goods.
- What’s good, what bad? When we purchase a product, we really don’t know the value of it. We’re swayed by things that do not matter. Price alone is never enough to completely offset the value of it. It’s difficult to know which product is best, for instance, the brand can influence people into purchases.
Nearly everyone understands that credit card debt is bad, whether you’re in debt or spending problems.
So, if we behave irrationally, are we just making a mistake, We are trying to address which aspects of our economic behavior are innate, and which ones we learn from the market.
You better think twice about one particular purchase. Don’t buy immediately if is something you have not really need. Remember, what matters is the item’s future value to you, not how much you’re spent on it.
