Behavioral economics and decision making

Chris Clarke 2nd Assignment

October 2nd, 2009 at 13:33

I really enjoyed the Dan Ariely talk this week. I found it fascinating that by making questions slightly more complex people can make irrational decisions. Interesting but not surprising that when decisions are difficult that people accept defaults – the example given on the morals of a default ‘no’ to organ donation has been discussed at length in UK. We see, and must consider (and to be honest sometimes exploit) these types of behavior all the time in user interface design.

The observations on cheating where very interesting. The fact that if people can make justifications about their choices around minor cheating is related to some of the ideas around endowment theory – depending on whether you own or don’t own an item, you can justify a higher sale or lower purchase price to your benefit based on the potential return to self (achieve a higher sale price or a lower purchase price), just in the same way people can justify their personal fudge factor to themselves. The difference here is that with cheating, you can decrease the fudge factor by influencing people and drawing their attention to morality directly before they make the decision (i.e. sign to verify truth at the TOP of the insurance mileage form)  – the trick being to directly challenge the justifications they make to themselves before they tell that white lie to the mirror.

In my post last week I said:

I wonder whether intuition is considered “human” behavior rather than econ due to the complex and individual weightings we subconsciously put on different vectors depending on our own past experiences. Combined with our personal profile of aspiration, ethics and attitude to risk, which will be different for every individual, means that two humans with the same control experiences can plausibly reach a different choice.

On reflection of this week’s reading, I wonder whether some of what I said there could be attributed to framing (collection of anecdotes and stereotypes) and whether or not an individual is risk seeking or loss averse.

A small point on Dan’s assertion towards the end of the talk that we should take comfort in the fact that we are irrational beings, and therefore we can look to fix the world. I despair to think about how marketeers can and do consciously use techniques such as asymmetric dominance this to their own effect when selling products and services!

I’ll come back later and add some more…

One Response to “Chris Clarke 2nd Assignment”

  1. kristinehoward_p2pu Says:

    Chris, regarding what you brought up in the beginning of your post, I have been thinking about similar issues. I don’t have my head around it yet, but I think design for usability to cater to how people most naturally behave (and designing that way for their own benefit) is a far cry from intentionally designing to manipulate the decision that someone will make. I know in advertising it has been done forever, and we do similar things to kids and dogs to trick them into behaving, but that makes it convenient and self-serving for us–it doesn’t make it right.

    Like I said, I haven’t commented on this before because I haven’t sorted myself out yet, but I think I am sensitive to this because there is a fundamental difference between:
    1) designing to help someone do (more easily and correctly) what they have already chosen to do, versus
    2) interjecting my opinion that I know what is in their best interest or in the interest of some greater good and that they do not, assuming they can absolutely be expected to make the wrong choice, deciding not to tell them any of this, and simply engineering their decision for them

    I also found the cheating thing to be quite fascinating. Rather than making a link to endowment theory, I found myself thinking it was an issue of framing: a filter that tells “if it is only a little, it doesn’t count,” or “if everyone is doing it, it is only fair for me to do it, too” or “if it isn’t money, it isn’t really stealing.” Anyway, I think it is sad and scary it is such a widespread problem. Based on the shrink (loss due to stealing) that is seen in the retail industry, I guess we shouldn’t be surprised to know that stealing is a big issue. But filters are not, I belong to the school of thought that says stealing is a choice that people make, whether or not they feel it is justified, and it should not be excused. Though my filter says it is “less bad” for a starving person to steal a small amount of food to feed their child than it is for a person to steal out of spite because they think the store’s prices are too high and they are “owed” something to even things out.

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