Letters Remain

Tag: behavioural-economics

  • ‘Locked’ Value, and Paying for Everything Twice

    How to account for the true cost and value of our possessions? In the same vein as Thoreau, who wrote in Walden: “the cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run”, David Cain suggests that everything…

  • Dark Patterns for Marketers, or: Practical Behavioural Economics

    Taking a systematic approach to implementing findings from behavioural economics into a sales cycle can “unlock significant value”, according to McKinsey’s Ned Welch. To help business do exactly that, Welch–in what, at times, reads a bit like a ‘dark patterns guide for marketers’–has written an article looking at four practical techniques from behavioural economics that marketers should use…

  • Against Behavioural Economics and Irrationality

    Praising Maurice Allais as the father of behavioural economics rather than Kahneman and Tversky,  John Kay introduces us to some of Allais’ ideas while simultaneously providing one of the finest arguments against the simplistic view of behavioural economics as the study of irrationality: The skill of piecing together sense from fragmented and inaccurate information is a central…

  • Price Reductions and Cognitive Fluency

    If the mental calculation required to determine the discount given on a product is difficult then we often misjudge the magnitude of the reduction. This “ease-of-computation” effect for judging price reductions is obviously related to other recent studies looking at ‘cognitive fluency‘ and is another way to manipulate and be manipulated through product pricing. Consumers’…

  • Prevention of Attainment Increases Desire, Decreases Attractiveness

    Being prevented from obtaining something we desire simultaneously increases our desire for the item and decreases its eventual attractiveness. That’s the counterintuitive result from a study that shows the various surprising effects of “being jilted”. We show how being “jilted”–that is, being thwarted from obtaining a desired outcome–can concurrently increase desire to obtain the outcome,…

  • Abstraction to Increase Effort (and Spending)

    When there is a medium placed between our effort and a desired outcome, we strive to maximise this medium regardless of whether or not it leads optimally to that outcome (think points or virtual currencies as a medium when attempting to obtain goods). That’s my attempt at a concise summary of the findings from a…

  • Choice Architecture of Organ Donation

    The supply of organs suitable for donation is vastly smaller than the demand. To try and increase the pool of potential donors a number of options have been tested: Redefining death so ‘living’ organs can be taken from donors who have died through brain death (via Link Banana), provide incentives for potential donors, or employ…

  • The Economically-(Im)Perfect World of Online Games

    Kristian Segerstrale–owner of online games company Playfish (acquired by Electronic Arts for $400m in November 2009)–discusses why online game environments are exciting places for economics research (and specifically: “how social factors influence economic decision making”): When economists try to model behavior in the real world, they’re always dealing with imperfect information. “The data is always…

  • Taxes (Not Subsidies) Control Calorie Intake

    It’s not surprising to discover that in an experiment looking at how taxes and subsidies can be used to influence healthier food purchases it was the taxing of unhealthy food that improved choices, not the subsidisation of healthy options. Strangely, though, it turns out that the health food subsidies actually worsened choices (the study theorises that…

  • Financial and Public Incentives to Perform: What Works

    Large bonuses and salaries are in place to attract prime talent and as an incentive to improve performance, goes conventional wisdom and the bankers’ rhetoric. However recent research by Dan Ariely (author of Predictably Irrational) and colleagues suggests that while large pay will attract the best talent, large performance-based bonuses may hinder superior performance. Interestingly big…