Abstract: Experimental studies of the WTP-WTA gap avoid social trading by implementing an incentive compatible mechanism for each individual trader. We compare a traditional random price mechanism and a novel elicitation mechanism preserving social trading, without sacrificing mutual incentive compatibility. Furthermore, we focus on risky goods - binary monetary lotteries - for which asymmetries in evaluations are more robust with respect to experimental procedures. For both elicitation mechanisms, the usual asymmetry in evaluation by sellers and buyers is observed. An econometric estimation sheds new light on its causes: potential buyers are over-pessimistic and systematically underweight the probability of a good outcome.
Part 2 of the TED Radio Hour episode Memory Games. About Daniel Kahneman's TEDTalk Nobel laureate and founder of behavioral economics Daniel Kahneman.
Daniel Kahneman is an elder statesman in the field of behavioral economics. In the mid-1970s, with his collaborator Amos Tversky, he was among the first academics to pick apart exactly why we make "wrong" decisions.
Their work treated economics not as a perfect or self-correcting machine, but as a system prey to quirks of human perception. The field of behavioral economics was born. Kahneman was awarded the Nobel Memorial prize in 2002 for his work with Tversky, who died before the award was bestowed.
Since the release of 2008′s Nudge, behavioral economics (BE) has quietly invaded the public’s perception. Some of the most well-known examples include the creation of the Behavioral Insights Team in the UK, Cass Sunstein’s appointment in the Obama Administration, and the rise of popular economics books like Daniel Kahneman’s Thinking, Fast and Slow (and to a certain extentFreakonomics, which is not actually about BE).
This prominence has led to gut reactions, polarized opinions, and popular misconceptions. However ideas42’s Matt Darling and Saugato Datta, as well as ideas42 co-founder Sendhil Mullainathan, recently published an essay with the Center for Global Development to tackle this very topic.
They identify three common misconceptions, and delve into the nuances of each. The first, that“behavioral economics is about controlling behavior:”
Some people are worried that behavioral economics will be used, whether by corporations or the government, to control behavior. …What distinguishes the behavioral toolset, however, is that so many of the tools are about helping people to avoid making a decision that they themselves would consider a mistake. Elderly Americans who enroll in Medicaid Part D private drug plans are asked to choose from over 40 options. An intervention that reduced this overload – sending enrollees a letter with information about three alternative plans that would be cheaper for them — nearly doubled the proportion of enrollees who decided to switch plans… and saved $150 per year on average for each person who switched.
Recent models of unethical behavior have begun to examine the combination of characteristics of individuals, issues, and organizations. We extend this examination by addressing a largely ignored perspective that focuses on the relationships among actors. Drawing on social network analysis, we generate propositions concerning types of relationships (strength, multiplexity, asymmetry, and status) and the structure of relationships (structural holes, centrality, and density). We also consider the combination of the type and structure of relationships and how this embeddedness perspective relates to social contagion and conspiracies.
I’d like to write about the implications of living longer for retirement planning and the role that behavioral biases play in the difficulty people have in planning for their retirement years. My research interests are in how people think about the future, especially when they are planning for the future, and how thinking about the future is different than thinking about the present. My research supports what the physicist Niels Bohr (and many others) reportedly said, “predictions are difficult, especially about the future”. The first and biggest challenge is paying attention to the future long enough to make a plan. Why is thinking about the (far) future so difficult, especially when it comes to money? You might think it is simply because people are short-sighted and greedy. We know from behavioral research, however, that given a choice between a healthy snack and a sweet treat, people will eat the treat now and plan to have the healthy snack next week1.
However, when next week arrives, they do the same thing—indulging their current self now and promising virtuous choices for the future self. And to some extent, we see the same thing with financial behavior—people run up credit card debt to pay for a new TV or a winter vacation. But while I believe that self-control problems and what behavioral economists call “present-biased preferences2 ” are real and important, I think they are probably a relatively minor cause of the difficulty most of us having in thinking about long-term financial planning. I think it is important that people stop beating themselves up over their weakness of will and lack of self-control and realize that long-term planning is actually an unnatural act that requires outsmarting the brain’s natural focus on the present and near-future.
As head of the White House office that deals with government regulation under President Obama, Cass Sunstein pushed for fewer rules and lower costs. His new book lays out a path for simpler, if not smaller, government going forward.
Whenever a federal agency sets new standards, say about the environment, or the financial industry, there's an office inside the White House that has to put the final seal of approval on those regulations. It's called OIRA (pronounced, "Oh, Ira") -- theOffice of Information and Regulatory Affairs.
Up until last year, Cass Sunstein ran that office for President Obama. And he's got a new book about making government, and its rules, work more elegantly. It's called "Simpler".
"Think of a large company which is not going to get smaller. It shouldn't. It should grow. But it can get simpler. It can make the experience for its own employees and for its customers easier," Sunstein says. "My suggestion is that governments can serve their citizens a lot better if they get simpler."
The current regulatory system in the United States is undoubtedly complicated, with state and local agencies issuing their own rules. That's in addition to the sometimes conflicting policies coming out of multiple federal agencies. At Sunstein's former post, OIRA, the focus is on negotiating and solving those potential conflicts.
That can lead to criticism that the office is a convenient place for Presidents to allow inconvenient rules to wither away. Sunstein doesn't agree with that characterization.
a b s t r a c t Innovation should improve people’s lives. The links made between innovation and subjective wellbeing (SWB) have, however, rarely been made. We use a representative survey of the British population and new primary data to explore the relationship between innovation and SWB. We show that creativity and SWB are correlated. This applies to questions related to self-reported creativity and for working in creative environments. More research is needed to determine the relative effects of each direction of causality in the relationship between innovation and SWB in the workplace and in life generally
Colin Camerer is the Robert Kirby Professor of Behavioral Economics at Caltech. He earned a Ph.D. from the University of Chicago in 1981 and worked at Northwestern, Penn, and Chicago before Caltech. He has published more than 150 articles worked on four books, most notably Behavioral Game Theory (2003). Colin's research group is interested in the psychological and neural basis of choice, strategizing in games, and trading in markets. His group uses many methods, including eye tracking, SCR, fMRI, EEG, TMS, field experiments, and analysis of field data on taxicabs, sports performance, and movie revenues. Colin has been the past president of the Economic Science (experimental economics), the Society for Neuroeconomics, and was elected a Fellow of the Econometric Society.
In the spirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection in a small group. These local, self-organized events are branded TEDx, where x = independently organized TED event. The TED Conference provides general guidance for the TEDx program, but individual TEDx events are self-organized.* (*Subject to certain rules and regulations)
Why we need to understand cultural context when applying behavioural economics The increase in research in markets such as Asia and Latin America makes understanding the impact of cultural context on consumer decision making more important than ever before. While quantitative researchers have long accepted that survey research is affected by culture through phenomena such as acquiescence bias or extreme response styles, cultural differences have far more diverse and wide-ranging implications for marketing and market research.
Behavioural economics is being enthusiastically adopted across the market research industry all over the world. Researchers everywhere are applying insights from decision making science and embracing the concept that we’re all a little bit irrational. But are we irrational in the same way?
Am 4. November 2013 hielt Prof. Paul Dolan, Ph.D., London School of Economics and Political Science, die jährlich zu einem anderen Thema stattfindende Queen's Lecture mit dem Titel „Happiness by Design".'...
You’ve heard of the placebo effect. If not, it essentially works like this. You take a pill thinking it’s medicine, but it’s actually a sugar pill, and yet because you believe it is medicine, it workslike medicine.
Before we get into what this has to do with pricing, I’d like to take a moment to stress just how powerful the placebo effect is. This excellent video does a superb job of explaining the power of the placebo effect.
Abstract: With the Patient Protection and Affordable Care Act (ACA) set to sharply increase access to medical care, the problem of rising costs moves center stage in health law and policy discussions. “Consumer directed health care” proposals, which provide patients with financial incentives to equate marginal costs and benefits of care at the point of treatment, demand more decision making ability from boundedly-rational consumers than is plausible. Proposals that seek to change the incentives of health care providers threaten to create conflicts of interest between doctors and patients. New approaches are desperately needed.
This article proposes a government-facilitated but market-based approach to improving efficiency in the private market for medical care that I call “relative value health insurance.” This approach focuses on the “choice architecture” necessary to enable even boundedly-rational patients to contract for the efficient level of health care services through their health insurance purchase decisions. It relies on using comparative effectiveness research, which the ACA funds at a significant level for the first time, to rate medical treatments on a scale of 1-10 based on their relative value, taking into account costs and expected benefits. These relative value ratings would enable consumers to contract with insurers for different levels of medical care at different prices, reflecting different cost-quality tradeoffs.
The article describes both the benefits of the approach and the impediments to its implementation. It concludes with a brief discussion of how the principles can also be applied to public health insurance programs.
Jeffrey V. Butler, Luigi Guiso and Tullio Jappelli
Abstract: Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental evidence of causation running from reliance on intuition to risk and ambiguity preferences. We directly manipulate participants' predilection to rely on intuition and find that enhancing reliance on intuition lowers the probability of being ambiguity averse by 30 percentage points and increases risk tolerance by about 30 percent in the experimental sub-population where we would a priori expect the manipulation to be successful (males)
This paper has two main objectives: (i) The main objective is to propose a theoretical and methodological delimitation of the Behavioral Economics approach. In this point, the paper argues that such delimitation involves a permanent tension with the hypotheses of rational choice theory of human behavior. (ii) The secondary objective of the paper focuses on the methodology submitted, for this, we present a couple of case studies in order to explain and test such methodology. Furthermore, the case studies will allow us to determinate some work tools of the Behavioral Economics approach.
Abstract Although catering to our biological interests, food companies have been recently accused of contributing to the growing problem of obesity. As a result, managers are torn between trying to satisfy consumers and trying to satisfy concerned public policy officials who bring threats of taxes, fines, restrictions, and legislation. Although the situation appears perplexing, there are profitable “win-win” solutions for both corporations and for consumers. After describing two hard-wired principles that influence food acquisition and consumption, we identify four reversible drivers of food consumption that marketers could use to help consumers better control what and how much they eat.
Despite the great effort that has been dedicated to the attempt to redefine expected utility theory on the grounds of new assumptions, modifying or moderating some axioms, none of the alternative theories propounded so far had a statistical confirmation over the full domain of applicability. Moreover, the discrepancy between prescriptions and behaviors is not limited to expected utility theory. In two other fundamental fields, probability and logic, substantial evidence shows that human activities deviate from the prescriptions of the theoretical models. The paper suggests that the discrepancy cannot be ascribed to an imperfect axiomatic description of human choice, but to some more general features of human reasoning and assumes the “dual-process account of reasoning” as a promising explanatory key. This line of thought is based on the distinction between the process of deliberate reasoning and that of intuition; where in a first approximation, “intuition” denotes a mental activity largely automatized and inaccessible from conscious mental activity. The analysis of the interactions between these two processes provides the basis for explaining the persistence of the gap between normative and behavioral patterns. This view will be explored in the following pages: central consideration will be given to the problem of the interactions between rationality and intuition, and the correlated “modularity” of the thought.
Abstract:We study theory of mind (ToM) and empathic underpinnings of Machiavellianism by use of functional magnetic resonance imaging, where account managers are used as participants in 3 studies. Study 1 finds evidence for activation of the medial prefrontal cortex, left and right temporo-parietal junction, and left and right precuneus regions; all five regions are negatively correlated with Machiavellianism, suggesting that Machiavellians are less facile than non-Machiavellians with ToM skills. Study 2 presents evidence for activation of the left and right pars opercularis, left and right insula, and left precuneus regions; the former four regions of the motor neuron system were positively associated, and the latter negatively associated, with Machiavellianism, implying that Machiavellians resonate more readily with the emotions of others than non-Machiavellians. This is the first study to our knowledge to show a negative correlation between perspective taking and emotional sharing in empathic processes in general and Machiavellianism in particular. Study 3 tests implications of managerial control on both performance and organizational citizenship behaviors, as moderated by Machiavellianism in the field. Our study grounds the functioning of Machiavellianism in organizations in basic neuroscience processes, resolves some long-standing ambiguities with self-report investigations, and points to conditions under which Machiavellianism both inhibits and promotes performance and citizenship behavior.
Abstract We study if taxpayers are loss averse when ﬁling returns. Preliminary deﬁcits might be viewed as losses assuming zero preliminary balances as reference points. Swedish taxpayers can to try to escape such losses by claiming deductions after receiving information about the preliminary balance. Using a regression kink and discontinuity approach, we study data for 3.6 million Swedish taxpayers for 2006. There are strong causal effects of preliminary tax deﬁcits on the robability of claiming deductions.
Compliance will increase and auditing costs will be reduced if preliminary taxes are calibrated so that most tax payers receive refunds.
Per Engstrom - Katarina Nordblom - Henry Ohlsson - Annika Persson
It has long been recognised by those working with data that given a large enough sample size then most data points will have statistically significant correlations because at some level everything is related to everything else. The psychologist Paul Meehl famously called this the ‘Crud Factor’ leading us to believe there are real relationships in the data where in fact the linkage is trivial.
Nate Silver made the same point when he warned that the number of ‘meaningful relationships’ is not increasing in step with the meteoric increase in amount of data available. We simply generate a larger number of false positives, an issue endemic in data analytics which led John Ioannidis to suggest that two-thirds of the findings in medical journals were in fact not robust.
So if we cannot always rely on statistical techniques to cut through swathes of data to find meaningful patterns then where do we turn? Naturally, we look to ourselves. Perhaps this is implicit in the discussion about the qualities of good data scientists, being ‘informed sceptics’ that balance judgement and analysis or that the key qualities are having a sense of wonder, a quantitative knack, persistence and technical skills. However as soon as we recognise that humans are involved in the analysis of data we need to start exploring some of the frailties of our judgement for if there is one thing that behavioural economics has taught us, is that none of us is immune from misinterpreting data.
Behavioral Science & Policy is a new international, peer-reviewed journal that features short, accessible articles describing actionable policy applications of behavioral scientific research that serves the public interest. Articles submitted to BSP undergo a dual-review process: leading scholars from specific disciplinary areas review articles to assess their scientific rigor; at the same time, experts in relevant policy areas evaluate them for relevance and feasibility of implementation. Manuscripts that pass this dual-review are edited to ensure their accessibility to scientists, policy makers, and lay readers. BSP is not limited to a particular point of view or political ideology.
BSP is a publication of the Behavioral Science & Policy Association and the Brookings Institution Press.
".............. if you’re an economist and haven’t done empirical psychology work before, try getting involved in some pricing experiments at a business school so you can see how that works. If you’re a psychology researcher who hasn’t worked in a company, try working with a small business to try to redesign the pricing of their products or services. To get a feel for practical applications in pricing, you might also want to take a look at Priceless by William Poundstone (or my book). And if you’re a practitioner who wants to bring more science into your work, go along to some academic conferences or seminars just to get a feel for how people work.
Sometimes people are worried that they won’t understand the science (or the economics) or the maths will be too difficult. Try it anyway and just understand as much as you can. People in other fields aren’t any cleverer, they just speak a different language – the people who work in that field learned it, and you could learn it too if you wanted to.
Practical applications aside, if you’re interested in cognitive economics research, you will have to have an independent spirit. There are not many people working in the field yet, so you probably won’t find a supervisor who specialises in it. You can get in touch with me and I can help you identify a list of papers to start with, and then see what kind of research question you’re interested in. I think cognitive economics will be an increasingly important field and this is a good time to get into it; but it is always more challenging to work in an emerging field because the directions of research and the conventions aren’t clear yet.
Caltech's Colin Camerer is a recent recipient of a MacArthur Foundation grant to continue his work as a leader of the emerging field of neuroeconomics.
Behavioral science received a nice pat on the back in September, when California Institute of Technology neuroeconomist Colin Camerer won a $625,000 no-strings-attached MacArthur Foundation "genius grant."
Using fMRI imaging, game-theory laboratory experiments, and a variety of other empirical tools, Camerer's work reaches across several disciplines and has been instrumental in the ongoing attempts to rewrite standard economic accounts of human decision-making so that they better map real-life behavior. As the Foundation put it, Camerer's "innovative thinking and modeling acumen are fostering an even more nuanced analysis of individual behavior and the practical policy implications of neuroscientific insights about human decision making."
Camerer recently conducted an email interview with Pacific Standard which touched on everything from financial regulation to the origins of brain-scan pseudoscience to the ongoing problems with economic orthodoxy. The interview has been shortened and lightly edited from its original form.
October 25th was an inspiring day as the 2013 Outstanding Achievement Prizewinners presented their latest discoveries and developments in brain and behavior research. Their work is revolutionizing the ability of neuroscientists to explore the brain and apply new information to prevent or reverse the course of mental illness. Two especially promising NARSAD Young Investigator Grantees also presented exciting work in developing a biomarker for schizophrenia and an innovative treatment for major depression. In addition, we were honored to have Elyn R. Saks, J.D., Ph.D., present a keynote address detailing her incredible story of a lifelong battle with schizophrenia and how she has been able to forge a full, productive and happy life for herself. Dr. Saks is the bestselling author of the book “The Center Cannot Hold: My Journey through Madness.”
Sharing your scoops to your social media accounts is a must to distribute your curated content. Not only will it drive traffic and leads through your content, but it will help show your expertise with your followers.
How to integrate my topics' content to my website?
Integrating your curated content to your website or blog will allow you to increase your website visitors’ engagement, boost SEO and acquire new visitors. By redirecting your social media traffic to your website, Scoop.it will also help you generate more qualified traffic and leads from your curation work.
Distributing your curated content through a newsletter is a great way to nurture and engage your email subscribers will developing your traffic and visibility.
Creating engaging newsletters with your curated content is really easy.