The document describes how behavioral economics influenced one person's decision-making process in purchasing new Christmas tree lights. It outlines the various cognitive biases, heuristics, and effects that shaped each stage of the decision: from initial information gathering, choices in the store amid tradeoffs and uncertainty, and reflections after the purchase. Key biases discussed include availability, framing, anchoring, loss aversion, sunk costs, affective forecasting errors, choice architecture impacts, and cognitive biases that rationalized the decision afterwards.

1. How BE shapes
decision-making
OR
How I bought a new
set of Christmas tree
lights
Joanna Chrzanowska
FMRS

2. Notice that a symbolic, social and
cultural context frames my decision
I want to celebrate Christmas
because I believe in it, its an
important social occasion, and
I want to do it in a style of
which others will approve

3. Notice that a symbolic, social and
cultural context frames my decision
I DO NOT want over the
top bad taste as I feel it is
of a lower class than the
one I aspire to.
I therefore decide I will buy
only warm white lights for
my Christmas tree and will
avoid icicles and reindeer.
However I will put the tree
in the window where it can
be seen from the outside.

4. My problem:
I last bought them 10 years ago and now large sections don‟t
work. I need some new lights for the Christmas tree.

5. Where do I start looking and why?
• Impressions formed
without conscious Saw last Driving by
awareness prime feelings year
and create familiarity bias Get a delivery
from Amazon
Advertising
• Repeated impressions
create validity bias
Looks like Homebase is the place to go. I‟ll try Amazon too.
• Authority/ social proof “ I got mine from the Garden Centre on the A24” (posh neighbour)
Read somewhere that Homebase sold more lights than any other
retailer last Christmas
• Confirmation bias –
Homebase will probably be cheaper – that garden centre is usually
choose info that fits with
overpriced ( and I hate the A24)
what you already know
• Ambiguity aversion Look on Amazon and cannot work out why prices vary so much for 200
lights – I am missing some information about quality, so I give up. The
reviews are mixed positive and negative.
I check the reviews trying to work out if there is anyone who has the
• In-group
same needs and criteria as I have. I would trust those reviews more.

6. How am I choosing in the shop? (1)
I suddenly decide I must have LED lights
Availability bias
because there is a cool kitchen display
I learn from reading a box that LED lights never need replacing so my
Framing
purchase turns from a distress purchase to an „investment‟.
240 warm white lights are £60!!!! I was thinking they would be
Anchoring
about £20… I am sure I never paid more than that.
Loss aversion I need two sets so if I spend £120 I can‟t afford my new party dress
But I already bought a new tree last year so I can‟t have a tree with
Sunk cost effect
no lights
Poor affective How will I feel going to the party in an old dress? Will that be worse
forecasts than having old rubbish lights on my tree? I can‟t decide.

7. How am I choosing in the shop? (2)
Why am I looking only at warm white LED lights? I could get old
Choice Bracketing
fashioned fairy lights…. It‟s what I had before. I have two choices.
Choice Wait a minute! A pack of 480 light on the bottom of the shelf is half
Architecture price – so I can get the equivalent of two packs for only £60!
No they are all half price today- I just saw the sign. I was too focused
on getting warm white instead of bright white. So I could get two
packs of 240 or even 4 packs of 160 which would give me even more
Choice Paralysis
lights for not much more money. Or would it? I can‟t work it out.
Damn, I‟m stuck. Is it better to have separate strings of lights in case
one fails or easier to have one big one?
Cognitive
My brain hurts and I‟m fed up of staring at this fixture.
depletion
I don‟t do satisfycing – the first satisfactory alternative. I always worry
there might have been a better one. I don‟t maxi-min – minimise
Common unfavourable consequences. I am positive so I usually maxi-max,
heuristics choose the one with most advantages. But today I‟m optimising: I will
get two packs to give me some flexibility but not 4 x 160s as that
might be a hassle with too many plugs.

8. After my purchase
Oops – I spent some of my party dress budget! Not clever. But I am sure
Cognitive
nobody will remember what I wore last year, and if I have a different top on, it
dissonance will be alright.
Endowment Considering I have a full and perfect set of lights for my tree that I will never
effect need to replace I reckon they are worth about £100
I‟ve always had classy lights on my tree. My daughter must be mistaken in
Self-consistency remembering a set of multi-coloured chasing lights…
Everyone who comes to the house will think my tree is the best and most stylish.
Egocentricity I think I am a good shopper.
The neighbour who criticised my tree last year has always been jealous of me.
Attribution
She is a very jealous person and can‟t stand to see anyone do better than she
error has. I don‟t think her being drunk at the time had anything to do with it.
Reciprocity She‟s invited us over for cocktails so we‟ll have to invite them back.

9. Summary of the biases and effects
Before During After
• Impressions formed without • Availability bias • Cognitive dissonance
conscious awareness prime • Framing • Endowment effect
feelings and create • Anchoring • Self-consistency
familiarity bias
• Loss aversion • Egocentricity
• Validity bias
• Sunk cost effect • Attribution error
• Authority/ social proof
• Poor affective forecasts • Reciprocity
• Confirmation bias
• Choice architecture and
• Ambiguity aversion Bracketing
• In-group bias • Possibility of Choice Paralysis
• Cognitive depletion
• Common heuristics
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