Scientific Definition
Decisions hinge on the next unit, not on the average.
Plain-English Definition
Decisions hinge on the next unit, not on the average.
Feynman Explanation
Averages are for reporting. Margins are for deciding.
Core Principle
Decisions hinge on the next unit, not on the average.
Mechanisms
Pending editorial review.
Decisions hinge on the next unit, not on the average.
Pending editorial review.
Pending editorial review.
Pending editorial review.
Pending editorial review.
Pricing, capacity, and resource decisions.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
Averages are for reporting. Margins are for deciding.
Examples
- Don't price by total cost; price by marginal cost.
- Pricing, capacity, and resource decisions.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Always ask: 'What is the cost / value of the next one?'
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Always ask: 'What is the cost / value of the next one?'
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
Each additional unit of a good provides less satisfaction than the previous one.
Exploiting price differences between markets for risk-free profit.
The study of how real humans actually decide — bounded, social, emotional, and inconsistent.
With clear property rights and low transaction costs, parties negotiate to efficient outcomes.
Specialize in what you give up the least to do.
Complements raise each other's value; substitutes lower it.
Fixed costs don't scale with output; variable costs do.
Innovation destroys old industries and creates new ones.
Each additional unit produces less marginal benefit.
A long-run planner self in conflict with a short-run impulsive self.
Owning something raises its valuation — sellers want more to give it up than buyers will pay to acquire.
Bad money drives out good when both are legally equivalent.