Late last month, New York Times writer John Tierney posted a good description of cognitive dissonance. To what Tierney wrote, I'll add another cognitive dissonance experiment that has obvious market parallels.

From Robert Cialdini's "Influence: The Psychology of Persuasion" comes:

"A study by a pair of Canadian psychologists uncovered something fascinating about people at the racetrack: Just after placing a bet, they are much more confident of their horse's chances of winning than they are immediately before laying down that bet. Of course, nothing about the horse's chances actually shifts; it's the same horse, on the same track, in the same field; but in the minds of those bettors, its prospects improve significantly once that ticket is purchased … Thirty seconds before putting down their money, they had been tentative and uncertain; thirty seconds after the deed, they were significantly more optimistic and self-assured. The act of making a final decision - in this case, of buying a ticket, had been the critical factor. Once a stand had been taken, the need for consistency pressured these people to bring what they felt and believed into line with what they had already done …". 





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