When stores like Wal-Mart, Sam's Club, and Costco began their rapid expansion in the 1990s, supermarkets were thrown for a loop. The limited service, thinner assortments, and “everyday low pricing” of items in these “supercenters” — including foodstuffs — created enormous cost savings and increased credibility with consumers. What was a Safeway or a Stop & Shop to do in the face of such brutal competition?
A new paper from Stanford GSB looks at the strategic pricing decisions made by grocery firms during that period in response to the shock to their local market positions by the entry of Wal-Mart. The paper answers the age-old question in the supermarket industry: Is “everyday low pricing” (EDLP) better than promotional (PROMO) pricing that attempts to attract consumers through periodic sales on specific items? Investigators find that while EDLP has lower fixed costs, PROMO results in higher revenues — which is why it is the preferred marketing strategy of many stores.
The research is also the first to provide econometric evidence that repositioning firms’ marketing approaches can be quite costly. Switching from PROMO to EDLP is six times more expensive than migrating the other way around — which explains why supermarkets did not shift en masse to an “everyday low pricing” format as predicted when Wal-Mart entered the game.
The dominant theories of human placebo effects rely on a notion that consciously perceptible cues, such as verbal information or distinct stimuli in classical conditioning, provide signals that activate placebo effects. However, growing evidence suggest that behavior can be triggered by stimuli presented outside of conscious awareness. Here, we performed two experiments in which the responses to thermal pain stimuli were assessed. The first experiment assessed whether a conditioning paradigm, using clearly visible cues for high and low pain, could induce placebo and nocebo responses. The second experiment, in a separate group of subjects, assessed whether conditioned placebo and nocebo responses could be triggered in response to nonconscious (masked) exposures to the same cues. A total of 40 healthy volunteers (24 female, mean age 23 y) were investigated in a laboratory setting. Participants rated each pain stimulus on a numeric response scale, ranging from 0 = no pain to 100 = worst imaginable pain. Significant placebo and nocebo effects were found in both experiment 1 (using clearly visible stimuli) and experiment 2 (using nonconscious stimuli), indicating that the mechanisms responsible for placebo and nocebo effects can operate without conscious awareness of the triggering cues. This is a unique experimental verification of the influence of nonconscious conditioned stimuli on placebo/nocebo effects and the results challenge the exclusive role of awareness and conscious cognitions in placebo responses.
We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources that are available for deliberation on a choice. In our experiment, subjects are placed under a high cognitive load (given a difficult number to remember) or a low cognitive load (given a number that is not difficult to remember). Subsequently, the subjects play a one-shot game then they are asked to recall the number. This procedure is repeated for various games. We find a nuanced and nonmonotonic relationship between cognitive load and strategic sophistication. This relationship is consistent with two effects. First, subjects under a high cognitive load tend to exhibit behavior consistent with the reduced ability to compute the optimal decision. Second, the cognitive load tends to affect the subject's perception of their relative standing in the distribution of the available cognitive resources. The net result of these two opposing effects depends on the strategic setting. Our experiment provides evidence on the literature that examines the relationship between measures of cognitive ability and strategic sophistication.
The human brain is the most advanced super computer in the universe, with over 100 billion neurons responsible for every conscious and subconscious decision/ action we make. It is hypothesized by some neuroscientists that the decisions we make are nothing more than the rate in which neurons fire within specific parts of our brain. Studies have demonstrated that the decisions we make are, in great part, executed within the orbitofrontal cortex. This is the brain’s decision engine. The decision process is influenced by a risk assessment and a reward assessment. The risk assessment modulated by the amygdala and the reward assessment modulated by the nucleus accumbens. The decision making process in our brains is quite a bit more complicated than the above, but for the most part these are the regions of our brains that modulate and carry out our decisions.
‘First Impression’ always has been in talks of people living in towns. Catch phrases like “First impression is the last impression.”, “You never get second chance to make good impression.” and “First impression lasts longer.” are very popular. Appearing in front of somebody at very first time is all about making an (long lasting) impression on its mind. Thus, first meeting is given more weightage to - in both human and animal world.
Most of us always seek opportunities to impress others positively because it has an enormous importance especially for employment, business and courtship. However, most of us mistakenly equate positive impression with good appearance or ‘looks’ only. It’s not the whole truth! You’ll realize same after going through rest of this article. At least, you’ll start looking deep inside a person, apart of how it looks.
This paper summarizes and highlights different methodological approaches to behavioural economics in the context of the conventional economic wisdom and the implications of these different methodological approaches for financial literacy, related institutional change, and public policy. Conventional economics predicts no substantive improvement from improvements to financial literacy. The errors and biases approach to behavioural economics suggests limited improvements to decision making from financial education as errors and biases are largely hardwired in the brain. Government and expert intervention affecting individual choice behaviour is recommended. The evidence suggests that the bounded rationality approach to behavioural economics, with its focus on smart decision makers and the importance institutional and environment constraints on decision making, is the most promising lense through which to analyse financial decision making. From this perspective, financial decision making can be improved by providing decision makers with better quality information presented in a non-complex fashion, an institutional environment conducive to good decisions, an incentive structure that internalize externalities involved in financial decision making, and financial education that will facilitate making the best use of the information at hand within a specific decision-making environment.
hanks everybody for attending our fourth ESRC workshop on “Personality and Preferences” in Stirling on Friday November 21st. It was the fourth of our six workshops funded by the ESRC that are taking place in 2014/15.
We had excellent presentations and interesting discussions with many new ideas emerging from the different economic and psychological perspectives on common topics. Some of the main talking points which arose were: The importance of the subjective versus the objective. Average effects versus individual heterogeneity. The differences between the measurement of economic preference parameters in experimental settings versus the psychological measurement of traits using scales and how both approaches can complement each other. The external and internal validity of various economic and psychological measures. Different standards to evaluate the quality of measures in economics and psychology. The use of personality psychology to explain individual differences in biased decision-making. The importance of background variables (e.g. social context) on economic preferences. The malleability of preferences. The question why incentivised experiments are considered best practice in economics. The domain-specificity of preferences. The psychometrics of economic preferences and economic games. The change of preferences and personality over the life course. Preference measures in children and adults. The difference between averages in personality and the distribution of personality.
There are many factors to fear. The most important one however (And widely unknown) is the shocking fact that our capacity to experience fear is directly correlated with our capacity to experience love. In other words, we can't suppress fear while still maintaining the ability to experience great love. Numbing one or ignoring one, equally affects the other.
Interestingly enough, there is some science behind it. It's long been known that oxytocin is the neurohypophysial hormone associated with love. For example, large amounts of oxytocin are released during and after child birth. Some say, to prevent the mother from harming the baby as a result of the agony of child birth. More recent studies are beginning to show that oxytocin also plays a large role in fear. This may explain why suppressing fears also reduces our ability to love and connect with others.
The more of our authentic selves we suppress, the less fear AND love we are vulnerable to experience, suppression being the opposite of vulnerability.
A friend recommend me the book Thinking, Fast and Slow when I asked him for a good read in the field of behavioral science — I am an entry level enthusiast. Half way thru it, everything has made sense to me till now, as has the concept of confidence/overconfidence as discussed by the author.
The less we know about something, say, a subject or incident, the more confident we feel about it. It’s like a jigsaw puzzle. It’s easy to fill a jigsaw puzzle if there are less pieces in it. The puzzle is complete or almost complete with just a few pieces.
We can form a coherent story if we have less data points. And as soon as we form a coherent story, we feel it’s true — which might or might not be the case. A coherent story is the key. We believe it and hence feel confident about it. Sometimes overconfident. And rightly said — it’s an illusion.
P.S. No takeaway from this post. Just a feeling of oh, that’s so right is all you get after reading it.
In the winter of 2011, a handful of software engineers landed in Boston just ahead of a crippling snowstorm. They were there as part of Code for America, a program that places idealistic young coders and designers in city halls across the country for a year. They’d planned to spend it building a new website for Boston’s public schools, but within days of their arrival, the city all but shut down and the coders were stuck fielding calls in the city’s snow emergency center.
In such snowstorms, firefighters can waste precious minutes finding and digging out hydrants. A city employee told the CFA team that the planning department had a list of street addresses for Boston’s 13,000 hydrants. “We figured, ‘Surely someone on the block with a shovel would volunteer if they knew where to look,’” says Erik Michaels-Ober, one of the CFA coders. So they got out their laptops.
The personal characteristics of diplomats influence what types of international agreements they prefer.
When America sends diplomats to international negotiations over big-ticket items like the new Trans-Pacific Partnership agreement, does it matter who they send, or how those diplomats think about cooperation? Is it better if the people we put on the airplane to Geneva have certain character traits? Should they be patient or seek more immediate rewards? Should our diplomats be good at chess — able to think many moves ahead — or altruistic?
International relations scholars have typically ignored the personal characteristics of diplomats in favor of explanations that highlight underlying interests and power relations between governments and economies. These factors are obviously important, but our new study (with Brad LeVeck and James Fowler) in the journal International Organization finds that American diplomats vary dramatically on how they perceive the value of international cooperation and the best ways to achieve it. It’s their personalities and skills, not how an agreement is designed, that explain these differences.
Yet because cognitive fluency is intangible, its value is often under-rated. For instance, consider the effect of rebranding the London Overground as part of the Tube network. Much of the route existed for decades as the Silverlink train line. But since it did not appear on the Tube map, it was mentally invisible and so unused; ten years ago you felt a bit like Spencer Tracy stepping off the train in Bad Day at Black Rock. Now, as an orange route on the Tube map, it is insanely popular. The rebranding of the line may have contributed more than the new trains.
Last week I heard of another British idea which may be as important as Harry Beck’s in making navigation mentally easy: www.what3words.com divides the entire surface of the earth into 3m x 3m squares and identifies each with just three common words. So the middle of the Spectator garden is what3words.com/liked.foods.loudly — while the front door is take.notes.thus. There are about 60 trillion such combinations available.
Do cab drivers ignore opportunities to make more money when it rains?
In a seminal paper, Camerer, Babcock, Loewenstein, and Thaler (1997) find that the wage elasticity of daily hours of work New York City (NYC) taxi drivers is negative and conclude that their labor supply behavior is consistent with target earning (having reference dependent preferences). I replicate and extend the CBLT analysis using data from all trips taken in all taxi cabs in NYC for the five years from 2009-2013. The overall pattern in my data is clear: drivers tend to respond positively to unanticipated as well as anticipated increases in earnings opportunities. This is consistent with the neoclassical optimizing model of labor supply and does not support the reference dependent preferences model.
I explore heterogeneity across drivers in their labor supply elasticities and consider whether new drivers differ from more experienced drivers in their behavior. I find substantial heterogeneity across drivers in their elasticities, but the estimated elasticities are generally positive and only rarely substantially negative. I also find that new drivers with smaller elasticities are more likely to exit the industry while drivers who remain learn quickly to be better optimizers (have positive labor supply elasticities that grow with experience).
Background Placebo treatment can significantly influence subjective symptoms. However, it is widely believed that response to placebo requires concealment or deception. We tested whether open-label placebo (non-deceptive and non-concealed administration) is superior to a no-treatment control with matched patient-provider interactions in the treatment of irritable bowel syndrome (IBS).Methods
Two-group, randomized, controlled three week trial (August 2009-April 2010) conducted at a single academic center, involving 80 primarily female (70%) patients, mean age 47±18 with IBS diagnosed by Rome III criteria and with a score ≥150 on the IBS Symptom Severity Scale (IBS-SSS). Patients were randomized to either open-label placebo pills presented as “placebo pills made of an inert substance, like sugar pills, that have been shown in clinical studies to produce significant improvement in IBS symptoms through mind-body self-healing processes” or no-treatment controls with the same quality of interaction with providers. The primary outcome was IBS Global Improvement Scale (IBS-GIS). Secondary measures were IBS Symptom Severity Scale (IBS-SSS), IBS Adequate Relief (IBS-AR) and IBS Quality of Life (IBS-QoL).
The Sutton Trust-EEF Teaching and Learning Toolkit is an accessible summary of educational research which provides guidance for teachers and schools on how to use their resources to improve the attainment of disadvantaged pupils. The Toolkit currently covers 34 topics, each summarised in terms of their average impact on attainment, the strength of the evidence supporting them and their cost.
The Toolkit is a live resource that will be updated on a regular basis as findings from EEF-fundedprojects and other high-quality research become available. In addition, we would welcome suggestions for topics to be included in future editions. If you have a topic suggestion, or any other comments or questions about the Toolkit, please contact Robbie Coleman email@example.com.
Despite normative predictions from economics and biology, unrelated strangers will often develop the trust necessary to reap gains from one-shot economic exchange opportunities. This appears to be especially true when declared intentions and emotions can be cheaply communicated. Perhaps even more puzzling to economists and biologists is the observation that anonymous and unrelated individuals, known to have breached trust, often make effective use of cheap signals, such as promises and apologies, to encourage trust re-extension. We used a pair of trust games with one-way communication and an emotion survey to investigate the role of emotions in regulating the propensity to message, apologize, re-extend trust, and demonstrate trustworthiness. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors, remedial strategies used by promise-breakers, their effects on behavior, and subsequent outcomes. We found that emotions triggered by interaction outcomes are predictable and also predict subsequent apology and trust re-extension. The role of emotions in behavioral regulation helps explain why messages are produced, when they can be trusted, and when trust will be re-extended.
Research reveals which types of music improve which types of athletic performance. Listening to jazz can improve your performance on the putting green, according to a new study. And jazz is not the only music that’s been linked to athletic performance, as one of the study’s authors Dr. Ali Boolani explains: “Other research has shown that country music improves batting, rap music improves jump shots and running is improved by any up-tempo music. But the benefit of music in fine motor control situations was relatively unknown. Hopefully, this is the first step in answering this question.” In the small experiment, 20 good golfers tried five different putts while listening to one of the following types of music:
By Hubert Janos Kiss, Ismael Rodriguez-Lara and Alfonso Rosa-García; Abstract: We report experimental evidence on gender differences in financial decision that involves three depositors choosing.
Abstract: We report experimental evidence on gender differences in financial decision that involves three depositors choosing between waiting or withdrawing their money from a common bank. We find that the position in the line, the fact of being observed and the observed decisions are key determinants to explain subjects’ behavior. Although both men and women value being observed, it has a greater effect on women’s decisions. Observing a withdrawal increases the likelihood of withdrawal but women and men do not react differently to what is observed, so they are equally likely to panic if a bank run is already underway. Interestingly, risk aversion has no predictive power on depositors’ behavior.
I don’t know about you, but I have a very hard time sitting still and just “being” instead of “doing.” My idea of “relaxing” usually involves something physical: running, swimming, cooking, spring cleaning, doing whatever, so long as I’m on the move. It takes a lot of discipline to just “be” instead of “do.” Which is why a passage from a recent post on the On Being blog, “The Disease of Being Busy,” really struck me.
Omid Safi, director of Duke University’s Islamic Studies Center, writes: “This disease of being ‘busy’ (and let’s call it what it is, the dis-ease of being busy, when we are never at ease) is spiritually destructive to our health and well-being. It saps our ability to be fully present with those we love the most in our families, and keeps us from forming the kind of community that we all so desperately crave.” Stopping myself from being busy, in a sense, is about simplifying. As American author Henry D. Thoreau once said, “Our life is frittered away by detail . . . Simplicity, simplicity, simplicity! . . . Simplify, simplify.” I can’t help but wonder how much of my life I fritter away with my obsession with detail. Busyness, it seems, is how I try to manage detail. Here are some other interesting reads, in case you missed them:
By W. Brian Arthur; External Professor, Santa Fe Institute; Visiting Researcher, Palo Alto Research Center.
Economics is a stately subject, one that has altered little since its modern foundations were laid in Victorian times. Now it is changing radically. Standard economics is suddenly being challenged by a number of new approaches: behavioral economics, neuroeconomics, new institutional economics. One of the new approaches came to life at the Santa Fe Institute: complexity economics.
Complexity economics got its start in 1987 when a now-famous conference of scientists and economists convened by physicist Philip Anderson and economist Kenneth Arrow met to discuss the economy as an evolving complex system. That conference gave birth a year later to the Institute’s first research program – the Economy as an Evolving Complex System – and I was asked to lead this. That program in turn has gone on to lay down a new and different way to look at the economy.
EVERY FALL AT MAINE’S COMMON GROUND Country Fair, the Lollapalooza of sustainable agriculture, John Bunker sets out a display of eccentric apples. Last September, once again, they covered every possible size, shape, and color in the wide world of appleness. There was a gnarled little yellow thing called a Westfield Seek-No-Further; a purplish plum impostor called a Black Oxford; a massive, red-streaked Wolf River; and one of Thomas Jefferson’s go-to fruits, the Esopus Spitzenburg. Bunker is known in Maine as “The Apple Whisperer,” or simply “The Apple Guy,” and, after laboring for years in semi-obscurity, he has never been in more demand. Through the catalog of Fedco Trees, a mail-order company he founded in Maine 30 years ago, Bunker has sown the seeds of a grassroots apple revolution.
All weekend long, I watched people gravitate to what Bunker (“Bunk” to his friends, a category that seems to include half the population of Maine) calls “the vibrational pull” of a table laden with bright apples. “Baldwin!” said a tiny old man with white hair and intermittent teeth, pointing to a brick-red apple that was one of America’s most important until the frigid winter of 1933-34 knocked it into obscurity. “That’s the best!”
How our brains fool us on climate, creationism, and the vaccine-autism link.
“A MAN WITH A CONVICTION is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.” So wrote the celebrated Stanford University psychologist Leon Festinger, in a passage that might have been referring to climate change denial—the persistent rejection, on the part of so many Americans today, of what we know about global warming and its human causes. But it was too early for that—this was the 1950s—and Festinger was actually describing a famous case study in psychology.
This brief essay offers a general introduction to the idea of nudging, along with a list of ten of the most important “nudges.” It also provides a short discussion of the question whether to create some kind of separate “behavioral insights unit,” capable of conducting its own research, or instead to rely on existing institutions. #Nudging #neuroeconomics
In 1984 the nascent Santa Fe Institute sponsored two workshops on “Emerging Syntheses in Science,” at which the Institute’s founders brainstormed their plans for the future. At the time I was a beginning graduate student in computer science and had never heard of SFI, but reading the workshop proceedings a few years later, I was very excited by the Institute’s goal to “pursue research on a large number of highly complex and interactive systems which can be properly studied only in an interdisciplinary environment.”
The founders planned to define particular themes or programs that would benefit from the kind of intensive cross-disciplinary interaction offered by the new institute. SFI’s first official program, formed in 1987, was Economics. Before long, several influential players in the field took note of SFI’s novel interdisciplinary approach to economics, and the program grew quickly, in fact threatening to take over the fledgling organization.
Founder and first SFI President George Cowan wanted to make sure economics did not come to dominate. He wrote: “We had to start somewhere, but we also had to make sure from the beginning that economics didn’t become the one interest of the institute…I pushed hard to support at least one other program that would be equal in size to the economics program. We needed to broaden our academic agenda, and spread our bets.” Cowan’s push was to start a program in “adaptive computation.”