Michael D. Grubb, “Overconfident Consumers in the Marketplace.” Journal of Economic Perspectives 29(4): 9-36, Fall 2015.
• Overconfidence encompasses both excessive optimism and flattering views of the precision of beliefs. For instance, people are overconfident about their future ability to exercise self-control or to pay attention to the potential of looming high fees.
• Overconfidence harms consumers, and competitive markets do not necessarily mitigate overconfidence – they may even exacerbate its costs; rebates and gym memberships are canonical instances.
• Complex contract terms can take advantage of overconfident consumers.
• Overconfident consumers can be the source of a subsidy to fully rational consumers.
• Price controls could serve consumer and social welfare in the presence of overconfident consumers.
Saturday, April 28, 2018
Arad and Rubinstein (2015) on the People’s Perspective on Nudges
Ayala Arad and Ariel Rubinstein, “The People’s Perspective on Libertarian-Paternalistic Policies,” July 2015. This outline draws on the July, 2015 version of the paper, but a later version (October, 2017) of the paper is available here, as a pdf.
• Two online studies (each n>1000) are conducted with university students in Israel, Germany, and the US.
• In Study 1, subjects either are presented with an opt-in employee savings plan, or a government-mandated opt-out version with an 8% savings default.
• A large percentage (28-53% across the three countries) of subjects have a negative view of the opt-out version (especially if they are aware of the opt-in alternative), even if they intend to save 8% monthly. Indeed, fewer people indicate that they will take up the 8% savings rate when it is presented as the default than would take it up on an opt-in basis.
• Study 2 concerns attempts to decrease the consumption of fatty foods. Some measures (taxes, one-day-per-week ban) are hard paternalism, one is a System 1 nudge (shifting the placement of food items on menus), and two are System 2 nudges involving information provision (media campaign, smartphone app).
• The effectiveness of each of the measures in reducing consumption of fatty foods is presented to the subjects, with seven variations.
• Up to 25% of subjects think that government shouldn’t be in the business of trying to change diets.
• Most subjects (among those who do not object to the government being involved) seem to prefer whatever measure is most effective.
• But 19 to 54% of subjects prefer the info provision, even when it is less effective than the System 1 nudge.
• The “hard” interventions attract little support.
• The October 2017 version of the paper includes these two sentences in the abstract: "The opposition to soft interventions appears to be driven by concerns about manipulation and the fear of a 'slippery slope' to non-consensual interventions. Opposition to soft interventions is reduced when they are carried out by employers rather than the government."
• Two online studies (each n>1000) are conducted with university students in Israel, Germany, and the US.
• In Study 1, subjects either are presented with an opt-in employee savings plan, or a government-mandated opt-out version with an 8% savings default.
• A large percentage (28-53% across the three countries) of subjects have a negative view of the opt-out version (especially if they are aware of the opt-in alternative), even if they intend to save 8% monthly. Indeed, fewer people indicate that they will take up the 8% savings rate when it is presented as the default than would take it up on an opt-in basis.
• Study 2 concerns attempts to decrease the consumption of fatty foods. Some measures (taxes, one-day-per-week ban) are hard paternalism, one is a System 1 nudge (shifting the placement of food items on menus), and two are System 2 nudges involving information provision (media campaign, smartphone app).
• The effectiveness of each of the measures in reducing consumption of fatty foods is presented to the subjects, with seven variations.
• Up to 25% of subjects think that government shouldn’t be in the business of trying to change diets.
• Most subjects (among those who do not object to the government being involved) seem to prefer whatever measure is most effective.
• But 19 to 54% of subjects prefer the info provision, even when it is less effective than the System 1 nudge.
• The “hard” interventions attract little support.
• The October 2017 version of the paper includes these two sentences in the abstract: "The opposition to soft interventions appears to be driven by concerns about manipulation and the fear of a 'slippery slope' to non-consensual interventions. Opposition to soft interventions is reduced when they are carried out by employers rather than the government."
Sunday, April 1, 2018
Jung and Mellers (2016) Look at US Attitudes Towards Nudges
Janice Y. Jung and Barbara A. Mellers, “American Attitudes toward
Nudges.” Judgment and Decision Making 11(1): 62-74, January 2016.
• System 1 nudges are those that take advantage of our relatively automatic, unthinking mechanism for making decisions – canny default settings are an example of a System 1 nudge.
• System 2 nudges enhance our cognitive abilities, perhaps by providing more information – calorie counts on food items are an example of a System 2 nudge.
• Study 1 conducted by Jung and Mellers looks at nine System 1 nudges and four System 2 nudges, in an internet-based survey (n=250). Subjects are asked if they are for or against nudges, and then rate the intensity of their feelings on the subject. (If you are unsure, you will be asked to explain why!) Subjects also rate nudges on various scales, such as whether they are a threat to autonomy.
• Jung and Meller's Study 2 manipulates the “framing” of the nudges, sometimes emphasizing individual effects, sometimes social effects; sometimes highlighting the benefits, sometimes highlighting the avoidance of costs. Attitudes also are collected about companies that institute nudges.
• System 2 nudges receive more support than System 1 nudges – but one System 2 nudge, where government provides a website that tracks people’s expenditures on food, energy, and so on, is disliked in a System 1-like manner.
• Also disliked are opt-out organ donation lists, those misleading white lines on Lake Shore Drive, one-click charitable donation opportunities at store check-outs, and credit card online payment mechanisms that default to fully paying off the debt.
• Empathic folks tend to support System 1 and System 2 nudges; conservatives and individualists tend to oppose both types of nudges. (“Reactant” people oppose System 1 nudges.) System 2 nudges are viewed as more effective, though evidence generally supports the superior effectiveness of System 1 nudges.
• Framing doesn’t matter much on average, but does matter with some sub-groups; for instance, “reactant” people oppose nudges more strongly when the frame points out the individual costs of not going along. Feelings about companies that nudge basically track the feelings about the nudges the companies implement.
• System 1 nudges are those that take advantage of our relatively automatic, unthinking mechanism for making decisions – canny default settings are an example of a System 1 nudge.
• System 2 nudges enhance our cognitive abilities, perhaps by providing more information – calorie counts on food items are an example of a System 2 nudge.
• Study 1 conducted by Jung and Mellers looks at nine System 1 nudges and four System 2 nudges, in an internet-based survey (n=250). Subjects are asked if they are for or against nudges, and then rate the intensity of their feelings on the subject. (If you are unsure, you will be asked to explain why!) Subjects also rate nudges on various scales, such as whether they are a threat to autonomy.
• Jung and Meller's Study 2 manipulates the “framing” of the nudges, sometimes emphasizing individual effects, sometimes social effects; sometimes highlighting the benefits, sometimes highlighting the avoidance of costs. Attitudes also are collected about companies that institute nudges.
• System 2 nudges receive more support than System 1 nudges – but one System 2 nudge, where government provides a website that tracks people’s expenditures on food, energy, and so on, is disliked in a System 1-like manner.
• Also disliked are opt-out organ donation lists, those misleading white lines on Lake Shore Drive, one-click charitable donation opportunities at store check-outs, and credit card online payment mechanisms that default to fully paying off the debt.
• Empathic folks tend to support System 1 and System 2 nudges; conservatives and individualists tend to oppose both types of nudges. (“Reactant” people oppose System 1 nudges.) System 2 nudges are viewed as more effective, though evidence generally supports the superior effectiveness of System 1 nudges.
• Framing doesn’t matter much on average, but does matter with some sub-groups; for instance, “reactant” people oppose nudges more strongly when the frame points out the individual costs of not going along. Feelings about companies that nudge basically track the feelings about the nudges the companies implement.
Thursday, March 8, 2018
Schulz, Thiemann, and Thöni (2016) on Nudging Generosity
Jonathan F. Schulz, Petra Thiemann, and Christian Thöni, “Nudging Generosity: Choice Architecture and Cognitive Factors in Charitable Giving,” USC-INET Research Paper No. 16-26, September 13, 2016.
• The subjects (n=869) are students at a Swiss university, who are asked at the end of a pen-and-paper study if they would like to donate to charity some of any winnings they make from the experiment.
• In one treatment, the students who indicate that they want to donate to charity must write in a charity name in a blank space. In the alternative treatment, the students are given a list of five well-known charities which they can choose among, along with a blank space in case they want to indicate another charity.
• The one-line summary of the results is that providing a short list of recommended charities, along with a “choose your own” option, doubles the number of donors relative to just having the “choose your own” option.
• The average donation per donor is unchanged, so the “list” treatment also doubles total contributions. Most donations in the "list" treatment go to listed charities; other charities are "crowded out" by not being listed.
• Females donate significantly more than males.
• The subjects (n=869) are students at a Swiss university, who are asked at the end of a pen-and-paper study if they would like to donate to charity some of any winnings they make from the experiment.
• In one treatment, the students who indicate that they want to donate to charity must write in a charity name in a blank space. In the alternative treatment, the students are given a list of five well-known charities which they can choose among, along with a blank space in case they want to indicate another charity.
• The one-line summary of the results is that providing a short list of recommended charities, along with a “choose your own” option, doubles the number of donors relative to just having the “choose your own” option.
• The average donation per donor is unchanged, so the “list” treatment also doubles total contributions. Most donations in the "list" treatment go to listed charities; other charities are "crowded out" by not being listed.
• Females donate significantly more than males.
Shakespeare on the Benefits of Information Avoidance
What sense had I of her stol'n hours of lust?
I saw't not, thought it not, it harm'd not me:
I slept the next night well, was free and merry;
I found not Cassio's kisses on her lips:
He that is robb'd, not wanting what is stol'n,
Let him not know't, and he's not robb'd at all.
(Othello, Act 3, Scene 3, Lines 2015-2020; this passage appears as the epigraph to Russell Golman, David Hagmann, and George Loewenstein, “Information Avoidance,” Journal of Economic Literature 55(1): 96-135, March 2017.)
********************************************
I had been happy, if the general camp,
Pioners and all, had tasted her sweet body,
So I had nothing known. O, now, for ever
Farewell the tranquil mind! farewell content!
(Othello, Act 3, Scene 3, Lines 2022-2025)
********************************************
How blest am I
In my just censure, in my true opinion!
Alack, for lesser knowledge! how accursed
In being so blest! There may be in the cup
A spider steep'd, and one may drink, depart,
And yet partake no venom, for his knowledge
Is not infected: but if one present
The abhorr'd ingredient to his eye, make known
How he hath drunk, he cracks his gorge, his sides,
With violent hefts. I have drunk,
and seen the spider.
(The Winter's Tale, Act 2, Scene 1, Lines 645-655)
I saw't not, thought it not, it harm'd not me:
I slept the next night well, was free and merry;
I found not Cassio's kisses on her lips:
He that is robb'd, not wanting what is stol'n,
Let him not know't, and he's not robb'd at all.
(Othello, Act 3, Scene 3, Lines 2015-2020; this passage appears as the epigraph to Russell Golman, David Hagmann, and George Loewenstein, “Information Avoidance,” Journal of Economic Literature 55(1): 96-135, March 2017.)
********************************************
I had been happy, if the general camp,
Pioners and all, had tasted her sweet body,
So I had nothing known. O, now, for ever
Farewell the tranquil mind! farewell content!
(Othello, Act 3, Scene 3, Lines 2022-2025)
********************************************
How blest am I
In my just censure, in my true opinion!
Alack, for lesser knowledge! how accursed
In being so blest! There may be in the cup
A spider steep'd, and one may drink, depart,
And yet partake no venom, for his knowledge
Is not infected: but if one present
The abhorr'd ingredient to his eye, make known
How he hath drunk, he cracks his gorge, his sides,
With violent hefts. I have drunk,
and seen the spider.
(The Winter's Tale, Act 2, Scene 1, Lines 645-655)
Friday, February 23, 2018
Zarghamee et al. (2017) on Nudging Charitable Giving
Homa S. Zarghamee, Kent D. Messer, Jacob R. Fooks, William D. Schulze, Shang Wu, and Jubo Yan, “Nudging Charitable Giving: Three Field Experiments.” Journal of Behavioral and Experimental Economics 66: 137-
149, February 2017 [abstract here].
• Study 1: Students had earned money over the duration of the semester by taking part in experiments; this study asked them if they wanted to donate some or all of their earnings to charity.
• Envelopes were provided such that students could either donate some of their earnings (opting in to charity, n=69), or, request a refund from the contribution of their money (opting out of charity, n=118).
• The opt-out version increases contributions by some 25%.
• Study 2 (n at most 59) looks at whether some cheap talk and a vote prior to deciding to contribute to charity – and potentially to keep donating for 10 months – can induce more giving than without the chitchat and vote. The cheap talk does the (cheap) trick, inducing higher donations by some 47%.
• Study 3 (n=70) involves one treatment where the charity mentions HIV, whereas the other treatment does not. The treatment makes no difference to donations, but changes to positive and negative affect during the experiment do influence giving. A lower positive affect decreases giving, but an increase in negative affect increases giving.
• Study 1: Students had earned money over the duration of the semester by taking part in experiments; this study asked them if they wanted to donate some or all of their earnings to charity.
• Envelopes were provided such that students could either donate some of their earnings (opting in to charity, n=69), or, request a refund from the contribution of their money (opting out of charity, n=118).
• The opt-out version increases contributions by some 25%.
• Study 2 (n at most 59) looks at whether some cheap talk and a vote prior to deciding to contribute to charity – and potentially to keep donating for 10 months – can induce more giving than without the chitchat and vote. The cheap talk does the (cheap) trick, inducing higher donations by some 47%.
• Study 3 (n=70) involves one treatment where the charity mentions HIV, whereas the other treatment does not. The treatment makes no difference to donations, but changes to positive and negative affect during the experiment do influence giving. A lower positive affect decreases giving, but an increase in negative affect increases giving.
Bosman, Hennig‐Schmidt, and van Winden (2016) on Power-to-Take Games
Ronald Bosman, Heike Hennig‐Schmidt, and Frans van Winden, “Emotion at Stake: The Role of Stake Size and Emotions in a Power-To-Take Game Experiment in China with a Comparison to Europe.” CESifo Working Paper Series No. 5858, April 19, 2016.
• In the two-player power-to-take game, Player A indicates what percentage of Player B’s monetary endowment Player A will claim.
• Player B learns of A’s claim, and then can choose to destroy some or all of her own endowment. Whatever is left after the destruction, Player A receives the chosen percentage of it, while Player B retains the remainder.
• Power-to-take is sort of a generalized version of the ultimatum game, and in particular, it allows Player B to have intermediate responses, in between accepting Player A’s suggestion or destroying the entire “endowment.”
• Three conditions: China Low (stakes), n=36; China High, n=36; and, EU, n=40. The results for the two China treatments are similar.
• Take rates in China average more than 50%; while most people do not destroy any of their endowment, the average amount of destruction is considerable, more than 20%. Higher take rates lead to more destruction.
• Higher take rates strengthen negative emotions in Players B, and it is possibly worse with higher stakes.
• Destruction decisions seem to be mostly driven by emotions.
• The results, including emotional responses, seem to be similar in China and Europe.
• In the two-player power-to-take game, Player A indicates what percentage of Player B’s monetary endowment Player A will claim.
• Player B learns of A’s claim, and then can choose to destroy some or all of her own endowment. Whatever is left after the destruction, Player A receives the chosen percentage of it, while Player B retains the remainder.
• Power-to-take is sort of a generalized version of the ultimatum game, and in particular, it allows Player B to have intermediate responses, in between accepting Player A’s suggestion or destroying the entire “endowment.”
• Three conditions: China Low (stakes), n=36; China High, n=36; and, EU, n=40. The results for the two China treatments are similar.
• Take rates in China average more than 50%; while most people do not destroy any of their endowment, the average amount of destruction is considerable, more than 20%. Higher take rates lead to more destruction.
• Higher take rates strengthen negative emotions in Players B, and it is possibly worse with higher stakes.
• Destruction decisions seem to be mostly driven by emotions.
• The results, including emotional responses, seem to be similar in China and Europe.
Subscribe to:
Posts (Atom)