IKEA Effect And Why It Matters In Business

The IKEA effect is a cognitive bias that describes consumers’ tendency to value something more if they have made it themselves. That is why brands often use the IKEA effect to have customizations for final products, as they help the consumer relate to it more and therefore appending to it more value.

Aspect	Explanation
Concept Overview	– The IKEA Effect is a psychological phenomenon that refers to the tendency of people to place a higher value on products or creations they have actively participated in building or assembling. This effect is named after the Swedish furniture retailer IKEA, known for its self-assembly furniture. The IKEA Effect highlights the emotional attachment and sense of ownership people develop for items they have contributed to creating.
Key Principles	– The IKEA Effect is grounded in several key principles: 1. Effort and Investment: People tend to value things they put effort and investment into, whether that effort involves physical assembly, customization, or personalization. 2. Emotional Attachment: Active participation in the creation process fosters an emotional connection to the final product. 3. Perceived Value: As individuals invest time and effort, they often perceive the resulting product as more valuable than if it were pre-made.
Applications	– The IKEA Effect has applications in marketing, product design, and consumer behavior. Companies use it to engage customers in co-creation, customization, and DIY experiences to enhance brand loyalty and perceived product value.
Implications for Business	– Businesses can leverage the IKEA Effect in the following ways: 1. Co-Creation: Involve customers in the design or customization of products. 2. Personalization: Allow customers to personalize products to their preferences. 3. Engagement: Create DIY experiences or assembly processes that engage customers. 4. Brand Loyalty: Foster stronger brand loyalty and emotional connections by letting customers actively participate in product creation.
Challenges and Risks	– While the IKEA Effect can enhance customer satisfaction and loyalty, it’s not without challenges. 1. Quality Concerns: Customers may not have the expertise to assemble or customize products flawlessly, potentially leading to quality issues. 2. Limited Applicability: The effect may not apply universally to all types of products or industries. Some customers may prefer ready-made solutions. 3. Implementation Costs: Designing products for customization or DIY assembly can be costlier.
Examples	– Examples of the IKEA Effect include IKEA furniture, build-your-own meal options at restaurants, and customizable products like sneakers, where customers can choose colors and designs. The effect extends beyond physical products and can be seen in the value people place on handmade crafts, artwork, or even software customization.
Psychological Insights	– Psychologically, the IKEA Effect is rooted in concepts of cognitive dissonance, self-perception theory, and endowment effect, which collectively explain why people assign higher value to things they have actively contributed to or possess. It taps into the human need for a sense of accomplishment and ownership.

Table of Contents

Understanding the IKEA effect

The IKEA effect is named after Swedish furniture giant IKEA and their range of iconic flat-pack furniture and home décor.

But the effect itself has been used in marketing consumer goods since at least the early 1950s. During that time, Betty Crocker instant cake mixes began to appear on supermarket shelves. Consumers were initially wary of these products, believing that it made the process of making a cake too simplistic.

Upon this realization, Betty Crocker changed the recipe so that consumers had to add an egg. This simple change in the process meant that consumers felt they had contributed some effort to the final product. Some 70 years later, cake mixes are as popular as ever.

Key Concepts

Personal Investment: The IKEA Effect suggests that when individuals invest time, effort, and labor into a task or project, they develop a sense of ownership and attachment to the outcome. This personal investment leads to a perceived increase in the value and desirability of the final product, regardless of its objective quality.
Assembling and Customization: The effect is often observed in situations where individuals assemble or customize products themselves, such as DIY furniture assembly, home improvement projects, or personal crafts. By actively participating in the creation process, individuals feel a sense of accomplishment and pride that enhances their perception of the final result.
Emotional Attachment: The IKEA Effect is driven in part by the emotional attachment individuals develop toward self-made products. This emotional connection can lead to increased satisfaction, enjoyment, and willingness to invest further resources into the product, such as time, money, or effort.

Implications of the IKEA effect for business and marketing

To harness the benefits of the IKEA effect, businesses should keep these principles in mind:

Consumers are often willing to pay more for a product if it means that there is some assembly required, creating a win-win scenario. Businesses save money on marketing and assembly costs, thereby increasing profit margins. Consumers do most of the assembly work, feel more empowered, and believe they received a good deal as a result.
Businesses that sell products such as Lego which facilitate personal expression will benefit the most. But the IKEA effect is nonetheless significant in less-customizable products. For example, some clothing companies are now selling made-to-measure attire by allowing consumers to become more involved in the tailoring process.
Value is derived from self-efficacy, which is a person’s belief in their ability to succeed in a given situation. It is therefore prudent for businesses to find a balance between value and effort. Returning to the cake mix example, we saw that consumers equated too little effort with product value. However, a product that requires too much effort reduces self-efficacy and is also likely to be judged as low value.

Potential disadvantages of the IKEA effect

In the software development industry, the IKEA effect can cause developers to become overly attached to their creations and become sensitive to criticism. Ultimately, software development companies can become myopic toward product development and marketing, hindering growth, and innovation.

For certain businesses or industries, the IKEA effect may simply be unsuitable. Large companies such as McDonald’s would become inefficient during peak periods if meals could be customized ad nauseam.

The same can also be said for logistics. DELL is a terrific example of a company adding customization to a generic product line by allowing customers to “build” their PCs. However, few businesses could absorb the logistical inefficiencies associated with this level of consumer involvement in the manufacturing process.

Benefits and Implications of the IKEA Effect

Understanding and leveraging the IKEA Effect can have several implications for businesses and individuals:

Enhanced Product Value: Businesses can capitalize on the IKEA Effect by offering DIY or customizable products that allow customers to participate in the creation process. By involving customers in product assembly or customization, businesses can enhance perceived value, satisfaction, and loyalty, leading to increased sales and brand loyalty.
Increased Motivation and Engagement: The IKEA Effect can be a powerful motivator for individuals engaged in creative or DIY projects. By recognizing and appreciating their efforts, individuals feel a sense of accomplishment and pride that fuels motivation and engagement, leading to higher levels of creativity and productivity.
Reduced Perceived Effort: The IKEA Effect can also influence how individuals perceive effort and difficulty in tasks. When individuals are emotionally invested in a project, they may perceive the effort required as less daunting or challenging, leading to increased persistence and resilience in the face of obstacles.

Challenges and Considerations

Despite its benefits, the IKEA Effect can also present challenges and considerations:

Quality Perception: The IKEA Effect may lead individuals to overestimate the quality or value of self-made products, leading to potential disappointment if the product does not meet expectations. Businesses must manage customer expectations and ensure that DIY or customizable products meet quality standards and provide a positive user experience.
Cost and Time Investment: DIY or customizable products may require significant time and effort investment from customers, which may not always be feasible or desirable. Businesses must balance the benefits of the IKEA Effect with the cost and convenience considerations of customers to ensure that offerings are attractive and accessible to target markets.
Sustainability and Longevity: The IKEA Effect may influence individuals to hold onto self-made products longer than necessary, even if they no longer serve their purpose or meet their needs. Businesses must consider the long-term sustainability and lifecycle of products to minimize waste and encourage responsible consumption habits among customers.

Strategies for Leveraging the IKEA Effect

To leverage the IKEA Effect effectively, businesses and individuals can adopt several strategies:

Customization Options: Offer customizable products or experiences that allow customers to personalize and tailor their purchases to their preferences and tastes. By providing customization options, businesses can enhance the sense of ownership and attachment customers feel toward their purchases, leading to increased satisfaction and loyalty.
DIY Opportunities: Provide DIY kits, tutorials, or workshops that empower customers to engage in hands-on creation and assembly. By involving customers in the creation process, businesses can foster a sense of pride and accomplishment that strengthens the emotional connection to the final product and brand.
Community Engagement: Create communities or platforms where customers can share their DIY projects, ideas, and experiences with others. By fostering a sense of community and belonging, businesses can deepen customer engagement and loyalty, while also providing valuable social validation and support for DIY enthusiasts.

Real-World Examples

The IKEA Effect is evident in various industries and contexts:

IKEA: The namesake of the IKEA Effect, IKEA, is renowned for its affordable DIY furniture and home goods that require assembly by the customer. By offering flat-packed furniture and clear assembly instructions, IKEA encourages customers to participate in the creation process, leading to a sense of pride and ownership in their furniture purchases.
Craft and Hobby Stores: Craft and hobby stores offer a wide range of DIY supplies, kits, and materials that allow customers to create personalized crafts and projects. By providing a diverse selection of customizable options, these stores appeal to DIY enthusiasts seeking to express their creativity and individuality through hands-on creation.
Home Renovation and Improvement: Home renovation and improvement projects often involve DIY enthusiasts tackling tasks such as painting, woodworking, or remodeling. By taking on these projects themselves, individuals not only save money but also develop a sense of pride and accomplishment in transforming their living spaces to reflect their personal tastes and preferences.

Case Studies

I apologize for any confusion. The IKEA effect is a psychological concept, and it may not always be explicitly mentioned by real-world companies. However, companies often leverage this effect in various ways to enhance customer satisfaction and loyalty. Here are a few real-world examples that indirectly demonstrate the IKEA effect:

Apple – “Designed by You”:
- Apple allows customers to personalize their devices, like iPhones and iPads, by choosing custom configurations, accessories, and engraving options during the purchasing process. Customers feel a sense of ownership and attachment to their customized Apple products, enhancing their perceived value.
LEGO – “Build Your World”:
- LEGO encourages customers to build their creations with its modular building blocks. The act of constructing unique creations fosters a sense of pride and attachment to the finished models. LEGO celebrates user-generated content and encourages customers to share their creations, further reinforcing the IKEA effect.
Build-A-Bear Workshop:
- Build-A-Bear Workshop allows customers to create customized stuffed animals by selecting the bear’s clothing, accessories, and even inserting a heart or sound module. Customers actively participate in the creation process, leading to a strong emotional connection with their personalized bears.
Subway – “Build Your Own Sub”:
- Subway’s “Build Your Own Sub” concept lets customers choose their ingredients and customize their sandwiches. Customers actively participate in the sandwich-making process, which can lead to a greater appreciation for their uniquely crafted meal.
IKEA – Assembly Experience:
- IKEA itself is a prime example of the IKEA effect. The company designs its products for customer assembly, allowing customers to take an active role in creating their furniture. This hands-on approach often results in a deeper attachment to the furniture.

Key takeaways

The IKEA effect describes the tendency for consumers to place more value on something they have created themselves.
The IKEA effect has significant benefits for businesses who can charge more for products that require some degree of consumer involvement. Both factors contribute to increased profit margins.
The IKEA effect can cause myopic business practices in the software industry. Furthermore, it will not be suitable for large organizations that place a high value on efficiency during periods of high demand.

Key Highlights

Introduction to the IKEA Effect:
- The IKEA effect is a cognitive bias where consumers value items more if they have played a role in creating them.
- Named after IKEA, known for its flat-pack furniture that customers assemble themselves.
- Similar concept used in marketing since the 1950s, as seen with Betty Crocker cake mixes.
Implications for Business and Marketing:
- Consumers are willing to pay more for products that require assembly, as they feel a sense of contribution.
- Businesses benefit from reduced marketing and assembly costs, while consumers feel empowered and value the product.
- Customizable products like Lego capitalize on personal expression, but even less-customizable products benefit.
Value and Effort Balance:
- Value is tied to self-efficacy, a person’s belief in their ability to succeed.
- Finding the right balance between value and effort is crucial. Too little effort can reduce product value, while too much effort might lower perceived value.
Potential Disadvantages:
- In software development, the IKEA effect can lead to attachment and sensitivity to criticism, hindering growth and innovation.
- Some businesses, like fast-food chains, might not suit customization due to inefficiencies during peak periods.
- Logistics challenges may arise in industries with high consumer involvement in manufacturing.
Key Takeaways:
- The IKEA effect emphasizes consumers valuing items they’ve had a hand in creating.
- Businesses can capitalize on this effect by charging more for products requiring consumer involvement.
- In software development, the effect can lead to myopic practices, and it might not be suitable for all industries due to logistical challenges.

Related Frameworks	Description	When to Apply
Endowment Effect	– A cognitive bias where individuals tend to value objects they own more than identical objects they do not own. The Endowment Effect contributes to the IKEA Effect by influencing people to overvalue self-assembled products due to their personal investment in creating them.	– When analyzing consumer behavior, pricing strategies, or product valuation. – Considering the Endowment Effect to understand how ownership influences perceived value and consumer decision-making effectively.
Sunk Cost Fallacy	– A cognitive bias where individuals continue to invest resources (time, money, effort) in a project or activity despite evidence that the costs outweigh the benefits. The Sunk Cost Fallacy can contribute to the IKEA Effect by causing individuals to overvalue self-assembled products due to their past investment in assembling them.	– When evaluating project decisions, resource allocation, or investment strategies. – Recognizing the Sunk Cost Fallacy to avoid irrational decision-making based on past investments and focus on future outcomes effectively.
Choice Architecture	– The design of decision environments to influence behavior and decision-making outcomes. Choice Architecture techniques, such as default options, framing, and nudges, can leverage the IKEA Effect by encouraging individuals to invest effort in product customization or assembly, enhancing their attachment and perceived value.	– When designing products, services, or user experiences to influence consumer behavior or preferences. – Leveraging Choice Architecture to encourage consumer engagement, personalization, and attachment effectively.
Product Customization	– The process of allowing customers to personalize or tailor products to their preferences, needs, or specifications. Product Customization leverages the IKEA Effect by enabling individuals to invest effort in designing and assembling products according to their unique preferences, enhancing their sense of ownership and attachment.	– When developing products or services to meet diverse customer needs and preferences. – Offering Product Customization options to empower customers, increase engagement, and enhance product satisfaction effectively.
Co-Creation	– A collaborative process where companies and customers work together to create value through product design, innovation, or problem-solving. Co-Creation leverages the IKEA Effect by involving customers in the creation process, fostering a sense of ownership and attachment to the resulting products or solutions.	– When seeking to enhance customer engagement, loyalty, or satisfaction. – Practicing Co-Creation to involve customers in product development, generate innovative ideas, and build stronger relationships effectively.
Gamification	– The application of game design elements and mechanics in non-game contexts to engage users, motivate behavior, and drive desired outcomes. Gamification can leverage the IKEA Effect by incorporating elements of challenge, achievement, and personalization to enhance user engagement and attachment to products or experiences.	– When designing apps, websites, or marketing campaigns to increase user engagement or loyalty. – Incorporating Gamification elements to motivate user participation, foster emotional connections, and enhance user experiences effectively.
Brand Attachment	– The emotional connection or bond that individuals form with brands, products, or companies. Brand Attachment leverages the IKEA Effect by fostering a sense of ownership, pride, and loyalty among consumers who identify with and invest in a brand’s products or values.	– When building brand loyalty, advocacy, or community among consumers. – Cultivating Brand Attachment through authentic brand experiences, storytelling, and product involvement effectively.
Self-Expression	– The act of conveying one’s identity, values, or personality through choices, behaviors, or possessions. Self-Expression leverages the IKEA Effect by allowing individuals to express their uniqueness and creativity through product customization, assembly, or personalization, enhancing their attachment and satisfaction.	– When developing products, services, or marketing strategies that resonate with consumers’ identities or aspirations. – Facilitating Self-Expression to empower individuals, foster emotional connections, and drive brand loyalty effectively.
Nostalgia Marketing	– A marketing strategy that evokes feelings of nostalgia or sentimentality to create emotional connections with consumers. Nostalgia Marketing can leverage the IKEA Effect by tapping into consumers’ memories and experiences associated with self-assembled products, enhancing their attachment and perceived value.	– When creating advertising campaigns, brand experiences, or product designs that evoke positive emotions or memories. – Leveraging Nostalgia Marketing to resonate with consumers, reinforce brand identity, and drive purchase intent effectively.
Social Proof	– A psychological phenomenon where individuals look to others’ actions or behaviors to guide their own decisions and actions. Social Proof can reinforce the IKEA Effect by highlighting others’ positive experiences or endorsements of self-assembled products, influencing individuals to perceive them as valuable and desirable.	– When building credibility, trust, or acceptance for products, brands, or ideas. – Leveraging Social Proof through testimonials, user reviews, or influencer endorsements to validate product quality and increase consumer confidence effectively.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.

Biases

The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.

Antifragility

Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).

Systems Thinking

Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Maslow’s Hammer

Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Streisand Effect

The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.

Heuristic

As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

First-Principles Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.

Groupthink

Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.

Stereotyping

A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

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