Module 8 - Applying Behavioural Economics Tools to Improve Decision Making Flashcards

Question

Outline five lessons for policy makers from what is understood about the influence of norms on behaviour.

Answer 1

Some social norms have a powerful automatic effect on behaviour (e.g., being quiet in a library) and can influence actions in positive and negative ways. Their power may come from the social penalties for noncompliance or the social benefit that comes from conforming. Behavioural interventions using social norms have been successful in a number of areas, and most are based on telling people what other people do in a similar situation. Five lessons for policy makers from norms are: (1) If the norm is desirable, let people know about it. (2) Relate the norm to your target audience as much as possible. (3) Consider social networks. (4) Norms may need reinforcing. (5) Be careful when dealing with undesirable norms.

Answer 2

(a) Priming: Exposure to one stimulus influences the response to another stimulus. Our subsequent behaviour may be altered if we are first exposed to certain sights, words, smells or sensations. In other words, we behave differently if we have been primed by certain cues beforehand. Priming seems to act outside of conscious awareness, which means it is different from simply remembering things. Primes do not have to be literally subliminal to work, as marketers have long understood. In fact, many things can act as primes, for example, the size of food containers primes our subsequent eating. Moviegoers ate 45% more popcorn when it was given to them in a 240g container than a 120g container; even when the popcorn was stale, the larger container made them eat 33.6% more popcorn. These types of effects are real and robust: They have been repeatedly proven in many studies. (b) Affect: The act of experiencing emotion is a powerful force in decision making. Emotional responses to words, images and events can be rapid and automatic, so that we can experience a behavioural reaction before we realize what we are reacting to. Moods, rather than deliberate decisions, can therefore influence judgments, meaning they end up contrary to logic or self-interest. People in good moods make unrealistically optimistic judgments, while those in bad moods make unrealistically pessimistic judgments. It has been argued that all perceptions contain some emotion, so that we do not just see a house: We see a handsome house, an ugly house or a pretentious house. This means that many people buy houses not because of floor size or location but because of the visceral feeling they get when walking through the front door—and may make a better decision as a consequence. (c) Ego: We tend to behave in a way that supports the impression of a positive and consistent self-image. When things go well in our lives, we attribute it to ourselves; when they go badly, it’s the fault of other people or the situation we were put in—an effect known as the “fundamental attribution error.” We think the same way for groups that we identify with. Psychologists have found this group identification to be a very robust effect, and its power is so great that it changes how we see the world. The classic example of this effect is sports fans’ memories of their team’s performance in a match. Fans systematically misremember, and misinterpret, the behaviour of their own team compared with the opponents. A match in which both teams appear equally culpable of committing fouls to an impartial observer are seen by a fan as one characterized by far more fouls by the opposing team than by their own.

Answer 3

The 4Ps Framework for Behavior Change organizes behavioural research findings to make them more easily applicable in the real world. It incorporates many behavioural levers that can be employed to support the healthy intentions of others. The intervention domains of the 4Ps Framework are: (a) Process interventions. How choices are made (b) Persuasion interventions. How choices are communicated (c) Possibilities interventions, What choices are offered (d) Person interventions, How intentions are reinforced. Each lever of change provides different paths to reduce resistance and nudges us toward healthy choices, offering ways to make intuitive choices healthier and rational choices easier. Together, the framework provides comprehensive suggestions for engineering the environment to make the healthy choice the easy choice.

Answer 4

Process interventions can influence behaviour by understanding choice heuristics. These nudges reposition options in physical or psychological space, affecting their relative appeal or ease of selection. This can involve changing the physical location of the options (order and accessibility) or the structure of the choice (defaults). (a) Order: Sequence matters; order has a strong impact on preferences and choices between options. For example, a political candidate whose name is listed first gains 3.5 percentage points in an election. Sometimes the middle option can have an advantage too—“extremeness aversion” leads many decision makers to avoid, for example, the largest or smallest drink sizes. There are some conflicting findings, but in general, the privileged position in a visual set (like a buffet line or menu) is the first item in a pair or the middle item in a set of three. The privileged positions in an experiential or auditory set (like a set of stockings to touch or a list of daily specials to hear) are both the first and the last items. When options are ordered, for example, by price or size, people with weak preferences tend to compromise by choosing the middle option because it is easier to rationalize. These biases can serve health goals if healthy options are offered in the advantaged positions in comparative choices. (b) Defaults: Due to a status quo bias, and also to the ease of not making a decision, defaults are extremely effective in guiding choices, even in domains as weighty as organ donations and retirement savings. Defaults are less effective when preferences are strong. Based on a research study, field data from health plan enrollments showed a large disparity in health plan choices between new and existing enrollees that could not be explained by unchanging preferences. One particular plan with significantly more favourable premiums and deductibles had a growing market share among new employees but a significantly lower share among elder enrollees. The status quo bias is consistent with loss aversion. It could be psychologically explained by previously made commitments and sunk cost thinking, cognitive dissonance, a need to feel in control and regret avoidance. We feel greater regret for bad outcomes that result from new actions taken than for bad consequences that are the consequence of inaction. (c) Accessibility: Accessibility, or convenience, exerts a gentle but powerful influence on choices. We drink more water when it is easily accessible on the table, rather than twenty feet away. In one study, cafeteria visitors purchased fewer junk foods when the transaction required waiting in a separate line and were less likely to serve themselves ice cream when it was less accessible, in a closed rather than an open freezer. Perceived accessibility affects behaviour as well. For example, at Google, stocking water bottles in coolers at eye level while moving sugary beverages to lower shelves behind frosted glass increased water consumption by 47%, decreasing calories consumed from sugary beverages by 6%.

Answer 5

In addition to nudging behaviour through the choice process, there are many opportunities for nudging through persuasive communication. Persuasion interventions are the least invasive and lowest cost way to nudge people toward better choices. The key to persuasion is communicating the right message, the right way, at the right time—when people will be most receptive to it. Effective persuasion captures attention and increases intuitive appeal, through vividness, comparisons and moments of truth. (a) Vividness: Vivid messaging and imagery grabs the attention of the intuitive, emotional mind. Triggering emotions such as delight or disgust can help the gut instinct be the right one. Vividness can be achieved with words or with a visual or tactile experience. Names play an important role in expectations and evaluations. Adding adjectives like “succulent” or “homemade” can make food not only more appealing but also tastier and more filling. Even fruit consumption can be nudged—A sign reading “fresh Florida oranges” increased fruit consumption by 26%. However, food names can spur overconsumption, too: Dieters thought a “salad special” was healthier and thus ate more of it than an identical “pasta special.” People eat more when portions are called “small” or “medium,” while believing they have eaten less. Using pictures or objects is another vivid way to engage the emotions, which can encourage persistence in healthy behaviours. For example, looking at bacteria cultured from their own hands led doctors to wash more often. Seeing a vial of fat from a gallon of whole milk caused many milk drinkers to switch to skim. Visuals can also simplify the decision process. In one cafeteria intervention, implementing a simple green/ yellow/red colour-coding system improved sales of healthy items (green) and reduced sales of unhealthy items (red). Google has implemented stoplight labels as well, with many Googlers reporting that the coloured labels helped them make healthy choices. (b) Comparisons: A persuasive message might quantify the effects of a behaviour, apply standards or frame the outcome as a loss or gain. A quantifying message could note, “Taking the stairs for five minutes a day five days a week burns off two pounds of fat in a year” or “1 Snickers bar = 20 minute run.” Standards can increase goal compliance by making progress measurable. Using a pedometer with a stated goal (e.g., 10,000 steps) increases physical activity. Drinking eight glasses of water or eating five fruits and vegetables per day provide helpful benchmarks for measuring desired healthy behaviours. Sometimes the comparison is implied, framed as loss or a gain. Although there are subtle qualifications, we are generally more sensitive to losses than gains and more motivated by fear than pleasure. (c) Moments of truth: A “moment of truth” is the time and place when we will be most receptive to persuasive messaging. The evaluation of choice alternatives depends on which goals are active in any particular moment. For example, in an office building, signs reminding employees to take the stairs can be placed at the elevators, when people are thinking about their goal of getting upstairs. In the right locations, stair prompts with messages such as “Burn calories, not electricity” have been found to be highly effective, increasing stair use by as much as 40%, even nine months later.

Answer 6

“Possibilities” refers to the composition of the choice set: Before trying to steer choices, the planner might improve options. While it may in rare cases be effective to ban undesirable behaviour (such as smoking in restaurants) or to legislate desirable behaviour (such as wearing seatbelts), the negative reactions against paternalism can often outweigh its benefits. The 4Ps Framework for Behavior Change advocates maintaining freedom of choice while improving the options, through assortment, bundling and quantity. Tempting but unhealthy options can be reduced or made less available without eliminating them altogether. (a) Assortment: The first decision a planner must make is what the assortment should be. One study found people were more likely to choose a healthy option (fruit over a cookie) from a larger assortment than a smaller one. Relative appeal can also be manipulated—placing fruit in a nice bowl or under a light increased fruit sales by more than 100%. Variety in an assortment is a powerful stimulant of consumption. Generally, when consuming more than one thing is possible, more options means more consumption. This is true even when variation is purely perceptual. For example, people ate more M&Ms from a bowl containing more colours of M&Ms, even though the total quantity and flavours were identical to a bowl with fewer colours. One way to reduce consumption without restricting choice altogether is by rotating variety over time, switching healthy or desirable options more frequently to encourage sampling or consumption and switching unhealthy or undesirable options less frequently to encourage satiation. (b) Bundling: To encourage healthier choices, healthy options can be strategically paired with other healthy options or even with less healthy options. Balancing, the combination of items that satisfy two goals, has been shown to be desirable. In many cases, healthy but less tasty and tasty but unhealthy options may be consumed simultaneously. Creative bundling can nudge people toward health— “Lesser evils” might be paired with “greater goods.” Bundling a healthy salad with a small portion of fries to create a “vice-virtue” bundle can persuade some people who would have ordered fries instead of salad to choose a bundle of onefourth fries and three-fourths salad. Another field experiment bundled addictive audiobooks with gym workouts to encourage exercise. (c) Quantity: Although most choice research has focused on which option is chosen, the quantity consumed is also influenced by nudges. We tend to believe the appropriate amount to consume is an entire portion (e.g., plate, bowl or package). As a result, we serve ourselves more food and eat more when dishes or utensils are large. In one experiment, nutrition academics at an ice cream social served themselves 31% more ice cream when given larger bowls and 57% more when given both larger bowls and larger serving spoons. Ice cream in a small cone is perceived to be more ice cream and more satisfying than the same amount in a large cone. At Google, the food team switched 22-ounce cups to 16-ounce cups to reduce consumption of caloric beverages, offered smaller to-go boxes to help with portion control and served desserts either plated or cut in small quantities.

Answer 7

With process, persuasion and possibilities, behaviour can be influenced in a specific context. It is only through the person, however, that behaviour can potentially be influenced across contexts over time and across multiple locations. The person intervention is the most challenging lever of change. Most behaviour change initiatives already focus on the individual person and fail to change behaviour, even when they succeed in changing intentions. A key reason for the inconsistency between intentions and behaviour is that resisting temptation requires resources such as attention and willpower, which are often in short supply. Fortunately, there are ways to support intentions that rely less on processing and willpower and more on supportive tools. We can provide some suggestions for influencing a person through goal setting and precommitment in order to reinforce healthy intentions. Precommitting to a goal is one of the most frequently applied behavioural devices to achieve positive change. Being consistent is best achieved by making a commitment, especially if it is done publicly. The object of the interventions is to maintain healthy behaviours over time, eventually making them habitual and automatic. Intention can be reinforced through: (a) Goals: Setting explicit goals can increase healthy choices by reducing the thinking required for engaging in a behaviour. (b) Precommitment: Willpower is a depletable mental resource; when people are tired, hungry, stressed or focused on something else, they are less likely to perform actions requiring willpower. There will be times in which a desired behaviour is particularly difficult or temptation is particularly strong. Knowing that our willpower may falter, we can preplan when possible or create our own “commitment devices.” Researchers have found that when we make decisions for the distant future, we save more money and choose healthier food. (c) Habits: Although people experience their own behaviour as conscious and intentional, the majority of all actions are automatic, bypassing the conscious decision-making process entirely. Because habits are cued automatically and enacted effortlessly, turning healthy behaviours into habits is the ideal way to sustain them.