The Behavioral Economics Guide 2018
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ISSN 2398-2020 THE BEHAVIORAL ECONOMICS GUIDE 2018 Introduction by Robert Cialdini Edited by Edited by Alain Samson Alain Samson behavioraleconomics.com The Behavioral Economics Guide 2018 With Contributions By ISSN 2398-2020 Author information: Alain Samson (Editor) Robert B. Cialdini (Introduction) Robert Metcalfe (Guest editorial) Ahmad F. Angawi (Aboab & Co), Florian Bauer (Vocatus), Tim Blomfield (BETA), Michael Daffey (BETA), Jorge Dryjanski Lerner (Irrational Company), Charlotte Duke (London Economics), Torben Emmerling (Affective Advisory), Jessica Exton (ING), Maria Ferreira (ING), Mariana Garza Arias (Irrational Company), Tim Gohmann (Behavioral Science Lab), Wiam Hasanain (Aboab & Co), Abbie Letherby (Decision Technology), Brendan Meehan (Genesis Analytics), Ed Nottingham (Decision Technology), Samantha Rosenberg (Genesis Analytics), Henry Stott (Decision Technology), Laura Straeter (ING), and Manuel Wätjen (Vocatus) (Contributing authors) Editorial assistant: Andreas D. A. Haberl Cover image: Pogonici Published on www.behavioraleconomics.com by Behavioral Science Solutions Ltd With Further Support By Copyright © by the authors All rights reserved Requests for permission to reproduce materials from this work should be sent to [email protected] or directly to contributing authors. Suggested citation: Samson, A. (Ed.)(2018). The Behavioral Economics Guide 2018 (with an Introduction by Robert Cialdini). Retrieved from http://www.behavioraleconomics.com. Suggested citation for individual sections/authors: [Author(s)] (2018). [Chapter/Section Title]. In A. Samson (Ed.), The Behavioral Economics Guide 2018 (with an Introduction by Robert Cialdini)(pp. [nn]-[nn]). Retrieved from http://www.behavioraleconomics.com. With Contributions By With Further Support By Table of Contents INTRODUCTION �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � V WHY THE WORLD IS TURNING TO BEHAVIORAL SCIENCE (ROBERT CIALDINI) �� � � � � � � � � � � � � � � � � � � � � � � VI PART I - EDITORIAL �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 BEHAVIORAL ECONOMICS: UNDER THE MICROSCOPE (ROBERT METCALFE)� � � � � � � � � � � � � � � � � � � � � � � � � � �2 PART II - APPLICATIONS �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 23 THE NUTS AND BOLTS OF BEHAVIORAL INSIGHTS UNITS �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 24 d�r�i�v�e�: A PRACTICAL FRAMEWORK FOR APPLYING BEHAVIOURAL SCIENCE IN STRATEGY �� � � � � � � � � � � � � � � � � � � � � � � 36 CONSUMERS’ DECISION PROCESS AND THEIR UTILITY EXPECTATION: HOW CAN YOU MEASURE IT? � � � � � � � � � � � � � � � � � 49 HAVING THE ENERGY TO MAKE BETTER CONSUMER DECISIONS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 56 SUPER BEHAVIOUR: DESIGNING AUSTRALIA’S SUPERANNUATION SYSTEM �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 63 BATTLING FOR BUYERS: HOW BANKS CAN COMBAT THE THREAT OF FINTECHS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 68 HOW TO DOUBLE SAVINGS RATES: A CASE STUDY IN NUDGING FOR GOOD� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 80 RISK SEEKER OR RISK AVERSE? CROSS-COUNTRY DIFFERENCES IN RISK ATTITUDES TOWARDS FINANCIAL INVESTMENT �� � � 86 “PIGGY-BANKING” ON FRIENDS: FINDING SUB-OPTIMAL LENDING AMONG PEERS �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 96 HOW HUMANS PREDICT BEHAVIOR (AND WHY THIS MATTERS TO PRACTITIONERS!)� � � � � � � � � � � � � � � � � � � � � � � � � � � � � 103 A POSITIVE TYPOLOGY OF IRRATIONAL DECISION STRATEGIES � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �110 PART III - RESOURCES � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 120 SELECTED BEHAVIORAL SCIENCE CONCEPTS �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 121 POSTGRADUATE PROGRAMS �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 164 TED & TEDX TALKS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 186 SCHOLARLY JOURNALS� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �206 APPENDIX �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 219 AUTHOR PROFILES � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �220 CONTRIBUTING ORGANIZATIONS �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �223 Acknowledgements The editor would like to thank Andreas Haberl and Chelsea Hulse for their help with this year’s BE Guide and Robert Metcalfe for writing a guest editorial. Special thanks go to Robert Cialdini for writing the introduction to this edition. We are grateful for the support received by Aboab & Co, Affective Advisory, Behavioral Science Lab, the Behavioural Economics Team of the Australian Government (BETA), Decision Technology, Genesis Analytics, ING, Irrational Company, London Economics, Vocatus, the Chicago School of Professional Psychology, the London School of Economics and Political Science, the University of Pennsylvania, and the University of Warwick. Behavioral Economics Guide 2018 IV INTRODUCTION Why the World Is Turning to Behavioral Science Robert B. Cialdini Robert B. Cialdini Why the World Is Turning to Behavioral Science To every thing there is a season and a time to every purpose under heaven. Ecclasiastes 3: 1 We are in a Golden Age of behavioral science. Like never before, governments, NGOs, busi- ness entities, medical and law practitioners, as well as everyday citizens are paying appreciative attention to the thinking and research of behavioral scientists (Sunstein, Reisch, & Rauber, 2018). Within the category of public policy alone, one observer was able to identify 196 pres- ently functioning behavioral insights units/initiatives across the world (Naru, 2018). Why now? I believe it has to do with the coordinated rise in standing of two academic fields: social psy- chology (my home discipline) and behavioral economics. The two domains share important commonalities (e.g. certain research methodologies and presumptions about human moti- vation as well as about the key role of context) such that both can be fairly placed within the province of behavioral science.1 Still, they are far from identical. For me, three major differences stand out. Behavioral economists ask questions mostly about the way people make economic choices/ judgments or the way particular financial systems (retirement plans, tax codes, etc.) affect those responses (Thaler, 2018). Social psychologists are willing to consider other, non-fiscal personal choices as well. For instance, my research teams have investigated why people are motivated to litter a public space, wear a home team sweatshirt, display charity organization posters, reuse hotel guest room towels, and volunteer to give a unit of blood. Second, behavioral economists still have to fight the rationality-versus-irrationality-of hu- man-behavior battle (Rosalsky, 2018). For example, to ensure that interpretations based in ne- oclassical economic theory are duly addressed, they are more likely than social psychologists to include in their research designs at least one condition involving a rational actor prediction. For their part, social psychologists have no such need, having long ago come to concur with Rabelais’ six-century-old observation regarding the pervasiveness of human illogic: “If you wish to avoid seeing a fool, you must first break your mirror.” As an aside, I once asked Richard 1 Although staking out its own territory, it is true that behavioral economics has incorporated some features of traditional social psychology. I have colleagues who feel robbed of the credit by behavioral economists who have claimed various discoveries as their own without acknowledging existing, highly similar social psychologi- cal findings. I don’t share their resentment. Although there’s some overlap, it’s not extensive. Moreover, if an- ything, behavioral economics has raised the public stature of social psychology by adopting some core features and legitimizing them in the minds of decision makers. There was a time, as recently as 10 years ago, when social psychologists wouldn’t be invited to international conferences on government or economic policy. I was invited to one such conference a decade ago and, once there, found myself labeled a “behavioural economist” on the printed program. When I asked the conference organizer about it, he whispered, “I wouldn’t have been able to get you invited as a social psychologist.” Those days are gone. An engaging question is why behavioral economics could play an accrediting role