Lecture 6

Question 1

keeping score

Answer 1

Money is a proxy for points on a scale of self-regard and achievement. We mentally keep score of these rewards and punishments, promises and threats. They shape our preferences and motivate our actions.

Question 2

What is a result of keeping score?

Answer 2

• we refuse to cut losses when doing so would admit failure.
• we are biased against actions that could lead to regret
• we draw an illusory but sharp distinction between omission and commission, not doing and doing. This is because the sense of responsibility is greater for one than for the other

Question 3

the emotion of regret is accompanied by..

Answer 3

• feeling that one should have known better
• sinking feeling
• by thoights about the mistake one has made and the opportunities lost
• by a tendency to kick oneself and to correct one’s mistake
• by wanting to undo the event and get a second chance

Question 4

anticipated regret (upward and downward)

Answer 4

Upward: focuses on comparing outcomes that would have been better than the current option –> less impulsive purchase behavior
downward: focuses on comparing outcomes that would have been worse than what actually occured “ if i don’t find this now, ill never be able to find it elsewhere.”

Question 5

sunking costs: Alchian-Allen theorem

Answer 5

one an additional fixed cost is added to two products you wanted to buy, the ratio of the price difference in the total price between two products decreases.

20 vs 50 euro bag = 30 euro difference 60% of 50 euro
already spent 100 euro on ticket… 120 vs 150 total expenses so 20% of 150. not a big deal anymore.

Question 6

Sunk cost: avoiding waste

Answer 6

since im already here, id better buy more, so as not to waste the investment on my transportation fee.

Question 7

Sunking costs: Thaler’s mental account theory

Answer 7

• past investment opens a mental account
• utilities fained during travels are considerd income
• income and expenditure should balance out to close the mental account

Question 8

So sunk costs basically lead to..

Answer 8

Downward anticipated regret due to waste avoidance. get crazy while you’re here!

Question 9

perceived after sale

Answer 9

when shopping overseas, the distance between the vendor and home increases the cost of after-sales service (impractical).
Perceived after-sale risk negatively influences impulsive shopping behavior–> also increases upward antipated regret

Question 10

what does information confusion lead to?

Answer 10

Rational decision making requires the ability to process complete information.

Tourist may experience information overload and confusion (due to language barrier)
- Worry and uncertainty in decision making
- Increased upward and downward antipated regret, because you just dont have a fucking clue

Question 11

4 conclusions on if sunk cost, information confusion and anticipated regret have a say

Answer 11

1. sunk-cost and downward anticipated regret are related to more impulse purchases overseas
2. sunk cost and information confusion are related to more downward anticipated regret and, in turn, to more impulse purchases overseas
3. after-sales risk redces impulse purchase overseas
4. upward anticipated regret did not play a role

Question 12

Inaction is the norm? norm theory

Answer 12

1. normaloty depends on cognitive availability of stimuli or events and possible alternatives
   - the ease by which one can retrieve similar instances and think of alternatives (“counterfactuals”)
   - normality in terms of past behavior, expectations or context, and social norms
2. normality holds implications for the person as it affects an array of factors, such that abnormal stimuli and events tend to stand out and elicit stronger reactions, like regret and surprise, compared to normal events

Question 13

what is the difference in default nudges when people have to opt- in or opt-out?

Answer 13

when people have to choice option out, a lot more get sold. think of organ donors. i think people are lazy

Question 14

are default nudges also effective when you’re being transparant about these nudges?

Answer 14

yes.

Question 15

preference reversal. And compare system 1 and 2 in this.

Answer 15

within (single evaluation) vs between categories (joint qvaluation)
The emotional reactions of system 1 are much more likely to determine single evaluation,
The comparison in joint evaluation involves a more careful and effortful assessment of system 2

Question 16

what is the relationship between high effort and low effort condition and talent with studie with painting at an action.

Answer 16

It depends on what people read: low or high effort is better.

Question 17

experiment 2 with paintings: quality first in 1 condition and then talent first in second condition. difference between the two conditions.

Answer 17

Quality condition: higher effort –> higher quality, higher value, higher talent.

Talent condition: no significant effect of effort on quality or talent. not clear whether effort influenced perceived value.

Question 18

What can we conclude about moral preferences and evaluations of a bank and kid that pyjamas caught on fire?

Answer 18

• Single evaluation: bank receives higher compensation at first (lost 10 million because of bad dealing, so possibly due to anchroing)
• joint evaluation: sympathy results in higher compensation for the child.

preference reversal

Question 19

What are implications of preference reversals?

Answer 19

• The beliefs we endorse when reflecting about morality (system 2) do not necessarily govern our emotional reactions (system 1)
• hence, the moral intuitions that come to min in different situations are not internally consistent
• inconsistency can be exploited

Question 20

suboptimal moral intuitions:
the taboo tradeoff

Answer 20

not willing to accept a small increase in risk (save money on cheaper health insurance), even though it may free up resources for more effective risk management (buy a safer car)

Question 21

moral licensing

Answer 21

• allowing oneself to indulge in something bad after doing soething good first
• also remember Thaler’s mental account theory: past investment opens a mental account

Question 22

moral licensing happens especially:..

Answer 22

• the behavior is relatively unimportant to one’s identity (fitgirl))
• the behavior is framed s progress rather than commitment to a goal
• avoiding hypocrisy is of minor concern

Question 23

what can we conclude from the energy conservation study from Tiefenback et al., 2013)?

Answer 23

Significant reduction in water consumption during feedback period, but also significant inrease in electricity consumption during feedback period. Net negative energy outcome despite succesful water conservation

Question 24

Reducing moral licensing

Answer 24

Framing behavior as goal commitment vs goal progress.
Depends focus on:
- subordinate goal (sutdying)
- superordinate goal (academic success)

Superordinate goal –> commitment frame –> redouble academic efforts rather than feel licensed to socialize (consistency effect)§