<< by Janet Driscoll Miller on September 14th, 2009
I recently finished reading “Predictably Irrational“, a book about behavioral economics by Dan Ariely. The book was fascinating and offered many examples of research in buyer behavior. One other concept that Ariely covered heavily in the book was a fundamental of behavioral economics: social norms versus market norms.
What are Social Norms and Market Norms?
Ariely defines social norms:
Social norms include the friendly requests that people make of one another… [they] are wrapped in our social nature and our need for community. Tye are usually warm and fuzzy. Instant paybacks are not required… It’s like opening a door for someone: it provides pleasure for both of you, and the reciprocity is not immediately required.
By contrast, market norms, as described by Ariely:
There’s nothing warm and fuzzy about it. The exchanges are sharp-edged: wages, prices, rents, interest, and cost-and-benefits. Such market relationships are not necessarily evil or mean–in fact, they also include self-reliance, inventiveness, and individualism–but they do imply comparable benefits and prompt payments. When you are in the domain of market norms, you get what you pay for–and that’s just the way it is.