Arbitrary Coherence

Once we make a decision about prices of goods, which can be arbitrary, this will shape future decisions about price, making them coherent.

This concept is closely related to Anchoring.

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Key Insights & Principles

Decision Making

1. Once we make a decision about the price of something, this will shape future decisions about similar goods.
2. We are more irrational than rational.
3. Demand is often manipulated by supply side actors, who stand to benefit from free markets.
4. The concept and observation of arbitrary coherence means that regulated markets may be optimal for essential services.

1. When making decisions, consider how anchors impact those decisions, and how decisions in the present may impact future decisions.

Book References