Predictably Irrational sounds like a book about the real estate market. But it's not, at least not directly. It is certainly relevant reading for real estate agents, brokers, and managers. The full title of the book is Predictably Irrational: The Hidden Forces That Shape Our Decisions (HarperCollins, 280 pp.). It is written by Dan Ariely who holds a joint appointment at MIT between the Media Laboratory and the Sloan School of Management. He is one of that relatively new breed, a behavioral economist.

While not every insight in this book would have a direct application to real estate, some come pretty close. Consider this passage from the chapter, "The Truth about Relativity": Suppose you're shopping for a house in a new town. Your real estate agent guides you to three houses, all of which interest you. One of them is a contemporary, and two are colonials. All three cost about the same; they are all equally desirable; and the only difference is that one of the colonials (the "decoy") needs a new roof and the owner has knocked a few thousand dollars off the price to cover the additional expense.

So which one will you choose? The chances are good that you will not choose the contemporary and you will not choose the colonial that needs the new roof, but you will choose the other colonial. Why? Here's the rationale (which is actually quite irrational). We like to make decisions based on comparisons. In the case of the three houses, we don't know much about the contemporary (we don't have another house to compare it with), so that house goes on the sidelines. But we do know that one of the colonials is better than the other one … . Therefore we will reason that it is better overall and go for the colonial with the good roof, spurning the contemporary and the colonial that needs a new roof.

Ariely fills this chapter with examples and experiments that show how our decisions and expressed preferences demonstrate "the problem of relativity – we look at our decisions in a relative way and compare them locally to the available alternative." Some sales people have known this intuitively for years; others will think about applying it.

The chapter on "The Cost of Zero Cost" is fascinating and possibly instructive for all sorts of marketing situations. "Zero is not just another price, it turns out. Zero is an emotional hot button – a source of irrational excitement…What is it about zero cost that we find so irresistible? Why does FREE! make us so happy? After all, FREE! can lead us into trouble; things that we would never consider purchasing become incredibly appealing as soon as they are FREE!" Once again, through examples and experimental results, the author shows us how the consumers' behavior may be predictably irrational. Suppose an HOA fee is $200 monthly. Doesn't receiving the first year of HOA fees FREE! sound better than getting a $2,400 rebate at the close of escrow?

Some might think a book like this is a bad thing, because it is practically a manual for manipulation. And in a sense, yes, it does have the potential for being such a manual. But would give manipulation an undeserved bad name. Any attempt to influence behavior is manipulation. (It is a parent's job.) Influencing behavior is not bad per se; it only becomes so when the influencing is done to the subject's ultimate harm.

Ariely devotes two chapters to "The Context of Our Character", particularly to honest and dishonest behavior. Among other things, he shows how very small environmental clues and reminders can have a strong, positive influence on honest and ethical behavior. Work place supervisors, in real estate offices and in other contexts, could learn some valuable lessons about bringing out the ethical best in their staffs by providing relevant prompts and cues. It is easy to make light of "inspirational" slogans and mottos displayed and rehearsed in an office environment; but they may have more benefit than the cynics think.

Predictably Irrational is an important book. It is a useful book. And it is a delightful read.

Published: April 9, 2009

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Bob Hunt is a director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .