Manipulating Purchasing Decisions

I read “Influenced Decisions” on Philos blog. It talks about Dan Ariely’s experiment on rationality of decision-making. According to the experiment, though we think we are making rational decisions, we can get easily influenced in making the wrong decisions. He experimented students for subscribing for a magazine with the following results.

As per Philos blog, 100 MIT students tested for Economist.com gave the following preferences:

Ariley1

Interestingly, 84% chose the third option and no one subscribed for second option.

Ariely, then conducted the experiment with just two choices and removed the dummy choice.

ariely2

Students preference changed. While in the first experiment they preferred the third option, in the second experiment, majority chose  the first option. The dummy option played a major role in the first experiment as students thought they were getting a better deal.

Now think of the impact this has from fraud perspective. Either a purchasing manager to get approval for a favoured supplier can insert fictitious proposals or have real suppliers submit dummy-like proposal

Submission of a fictitious proposal will be a clear case of fraud. Auditors might detect in regular course of audit and definitely during investigation. However, a dummy-like proposal will appear completely normal in the course of business and will be far more difficult to detect.

The question is whether on detection the purchasing manager’s behavior will be considering unethical or fraudulent? As the intent was to defraud the company, it should be considered fraudulent. However, it will be more difficult to  pursue legally. A small twist changes the whole picture.

Closing thoughts

Think carefully when doing your Christmas shopping. Check out whether the pricing is done to influence your decision towards certain product choices.

Wish you and your loved ones a Merry Christmas. Happy Holidays!

christmad

About these ads

2 comments on “Manipulating Purchasing Decisions

  1. Sonia, interesting stuff.
    Dan Ariely has put some more of these examples forward, which prove that the human economicus does not actually exist. we are ‘fooled’ by ourselves. However as Dan also shows there is some pattern behind this irrational behaviour. So maybe some hope exists. :)

    Happy New Year!

Comments are closed.