Behavioural links and comments 2009-09-18

  1. Dan Ariely has done some really interesting experiments about how to induce honesty or dishonesty. He thinks the results are a sad fact about human nature, but I don't take that view. For me, it's just more insight into how humans behave - which helps give us the power to improve.

  2. The Wall Street Journal has a couple of examples of businesses using behavioural economics to influence their customers' behaviour. Revealingly, these examples are mostly of the 'Nudge' type - an electricity company helping customers to reduce energy use, or a pharmacy enrolling more customers in home-delivery services to help the customer save money. This isn't what's relevant to most businesses, though. The third example is much more apposite - an insurance firm using (cognitive) behavioural insights to upsell more supplementary services. Much harder for this company to pretend it's just trying to help its customers out - but much more honest for them to put their story in the WSJ! Actually, though, it wasn't the customer who placed the story but the consultancy, Diamond, that advised them to do it. Who will now, I'm sure, have generated plenty of enquiries from other firms wanting to do the same. Good for them.

  3. Some similar insights from the Harvard Business blog (also from Diamond, I have just noticed) - Jetblue had to suspend an 'all-you-can-eat' flights programme because - unlike homo economicus - real people's utility curves stop following nice smooth linear shapes when they get close to the zero bound. The article identifies a nice checklist for behavioural work: framing, aversion, social context and timing or FAST.

  4. A famous result in the economics community (of the "aren't people thick" type) is referenced in this article from Free Exchange. They quote Bryan Caplan reporting that when researchers:
    "...asked the public to name the two "largest areas of government spending" from a list of six areas (foreign aid, welfare, interest on the federal debt, defense, Social Security, and health)"
    most people picked foreign aid and welfare. Foreign aid, however, makes up less than 1% of federal spending and welfare is less than half the cost of either defense or social security.

    Now is that a sign of an ill-informed public? Sure. But does it show a specific prejudice about foreign aid (which is how the results are typically interpreted) or just a bias towards picking the first item in a list? It's well-known that people pay more attention to the first couple of items in a list than to the rest.

    The original research can be found here but unfortunately only in summary form, and without giving the order in which the list was presented to respondents. It's an important question with big implications for how people interact with information. It's very easy to draw simplistic conclusions from surveys. Sometimes those conclusions are justified, sometimes not.

Thanks to Marginal Revolution and Consumerology (links in right-hand column) for pointers.


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