Friday, 30 April 2010

Rational ignorance

More on the economics bit - traditional not behavioural this time . When i was taught economics they defined it as the science of resource allocation. Now all the layman literature talks about incentives and how incentives drive every decision from where to live to marriage and divorce. Interestingly they say the world is a whole lot more rational than the behavioral economists would have you think.

Anyway came across this expression. Rational ignorance. I wish i had known about it before. It explains a lot of consumer purchase decisions.

At some point the cost of acquiring more information or evaluating a potential purchase, lets say a washing machine, really outweighs the incremental benefit. It is rational to live with a little ignorance beause after a certain point how wrong can you be?

Rational ignorance also explains why we like brands, they are information shortcuts, they signify quality (amongst a host of other stuff). They save us the information costs. It explains why we dont have an unerring temptation to subscribe to Which every time we want to spend more than £10.

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Just curious about marketing, psychology, economics, business, irrational behaviour, people, models, communications, advertising, market imperfections, b2b marketing. I work in the marketing communications industry for OgilvyOne.