Behavioral Economics Research Articles

Nudging law enforcement: evidence from low priority initiatives

The effect of non-binding guidelines (nudges) on citizens’ compliance with law has been studied theoretically and empirically in behavioral law and economics. Less is known about the impact of non-binding guidelines on the behavior of law enforcement agents and prosecution. Our work fills this gap. We study whether non-binding guidelines affect law enforcement and prosecution practices when the guidelines are not necessarily aligned with legal actors’ preferences. Our empirical analysis focuses on the impact of the adoption of a low priority initiative (LPI) on police and prosecutor behavior in Los Angeles County. Our results suggest that following the introduction of an LPI there is a rise in the number of misdemeanor arrests, but not in the rate that misdemeanor marijuana offenses are dismissed. We conclude that law enforcement preferences have a counterbalancing effect given that police officers may have strong punitive preferences. Prosecutors do not appear to respond to non-binding guidelines as evidenced by no change in the rate of dismissing cases.

Leveraging behavioral economics strategies to close gaps in biomedical HIV prevention.

Adolescent girls and young women (AGYW) in southern Africa face triple the HIV incidence of their male peers due to multiple factors, including economic deprivation and age-disparate relationships. A new study by Aurélia Lépine and colleagues has demonstrated that addressing healthcare costs among AGYW has the potential to reduce HIV incidence.

A Review of Research on Employee Incentive Mechanisms and Firm Performance from the Perspective of Behavioral Economics

This paper reviews the relationship between employee incentives and corporate performance from the perspective of behavioral economics. As the limitations of traditional material incentive theory gradually emerge, behavioral economics provides new theoretical support for the optimization of incentive mechanisms. This paper first explores the core concepts of behavioral economics, including loss aversion, intrinsic motivation, framing effects and social norms, and compares them with traditional incentive theories. By analyzing the additions and modifications of behavioral economics to incentives, it reveals how it affects incentive design, which in turn improves employee motivation and corporate performance. In addition, this paper demonstrates the successful application of behavioral economics principles in corporate incentives by combining practical cases and discusses the marginal effects and potential problems of incentives. Finally, this paper summarizes the effectiveness of the application of behavioral economics in the design of incentives and proposes directions for future research, such as personalized incentives, long-term incentive effects, cross-cultural research and technology-driven incentive design. The study shows that by scientifically designing incentive mechanisms, companies can more effectively motivate employees, improve overall performance, and achieve long-term sustainable development.

Research on Cultural Consumption from the Perspective of Mental Accounting

Behavioral economics emerged in the late 1970s and early 1980s. Compared to traditional economics, its theory is based on bounded rationality and combines with disciplines like psychology to address the limitations of traditional economic theory, providing more convincing explanations for market phenomena. Behavioral economics covers a wide range of topics, and this paper focuses on the perspective of mental accounting to study cultural consumption. Cultural consumption is the endogenous driving force for the development of the cultural industry. The psychological factors behind cultural consumption are key to influencing consumption decisions. Adopting the mental accounting theory from behavioral economics, residents' cultural consumption mental account consist of three main categories: economic capital account, cultural capital account, and social capital account, as well as six sub-accounts: transaction cost account, sunk cost account, leisure and entertainment account, aesthetic value account, social interaction account, and identity differentiation account. These accounts can effectively explain the influence mechanism between utility changes and cultural consumption behavior decisions. Based on the connotation and mechanism of the cultural consumption mental account theory, formulating various bundled sales strategies, reducing the sunk costs of cultural consumption, and promoting the high-quality development of the cultural industry are important paths to expand residents' cultural consumption. By integrating insights from behavioral economics, this approach can provide more effective solutions to boost cultural consumption and drive the sustainable development of the cultural industry.

GPT-3.5 altruistic advice is sensitive to reciprocal concerns but not to strategic risk.

Pre-trained large language models (LLMs) have garnered significant attention for their ability to generate human-like textand responses across various domains. This study delves into examines the social and strategic behavior of the commonly used LLM GPT-3.5 by investigating its suggestions in well-established behavioral economics paradigms. Specifically, we focus on socialpreferences, including altruism, reciprocity, and fairness, in the context of two classic economic games: the Dictator Game(DG) and the Ultimatum Game (UG). Our research aims to answer three overarching questions: (1) To what extent do GPT-3.5suggestions reflect human social preferences? (2) How do socio-demographic features of the advisee and (3) technicalparameters of the model influence the suggestions of GPT-3.5? We present detailed empirical evidence from extensiveexperiments with GPT-3.5, analyzing its responses to various game scenarios while manipulating the demographics of theadvisee and the model temperature. Our findings reveal that, in the DG Dictator Game, model suggestions are more altruistic than in humans.We further show that it also picks up on more subtle aspects of human social preferences: fairness and reciprocity. Thisresearch contributes to the ongoing exploration of AI-driven systems' alignment with human behavior and social norms,providing valuable insights into the behavior of pre-trained LLMs and their implications for human-AI interactions.Additionally, our study offers a methodological benchmark for future research examining human-like characteristics andbehaviors in language models.

Breaking the Rationality Assumption

This paper explores the role of Behavioral Economics in understanding how psychological factors influence consumer decisions, often leading to irrational choices. Traditional economics assumes rational decision-making, but in reality, emotions, cognitive biases, and social factors drive behavior. The paper highlights how illiteracy impacts decision-making, forcing short-term thinking over long-term benefits. It also discusses how psychological barriers like overconfidence, peer pressure, and emotional responses prevent rational decisions. Several Indian government policies, such as the Population Control Policy, Reservation System, and Demonetization, are reviewed to show how poor execution can lead to negative consequences. The paper concludes by emphasizing the need for better education, critical thinking, and informed policymaking to improve decision-making and empower people to make rational choices. Effective decision-making requires understanding both economic and psychological factors, which can lead to more balanced, thoughtful choices for the betterment of society.

Stoic Economics: A Theoretical Examination of a Shift in Consumer Philosophy towards Stoicism

Since the advent of modern economic thought, particularly within Behavioral Economics, consumer behavior has primarily been driven by psychological and utilitarian beliefs that prioritize self-interest and material accumulation. Now, as consumer mindfulness becomes a prevalent issue, we look to philosophy — rather than psychology — as a framework for consumer behavior. Stoicism, originating in Ancient Greece and Rome, has always been applied to individual well-being but has never been considered in the context of collective economic behavior, despite its basis aligning well with the basic economic problem of scarcity. We examine whether and to what extent virtue-based principles of Stoicism can shift economic activity, both for consumers and the economy at large. Through understanding of key tenets of stoicism, and translating these philosophical ideals to economic assumptions, we find that the stoic focus on long-term stability, rational decision-making, and the use of wealth for public good leads to deviations from the status quo of market activity.

The Application of Behavioral Economics to Teacher Professional Development

The Application of Behavioral Economics to Teacher Professional Development

Do Consumers Respond to Social Movements? Evidence from Gender-Stereotypical Purchases After #MeToo

This paper explores whether and how consumers respond to global social movements challenging systemic discrimination and stereotypes. We examine the impact of the #MeToo movement on the market for products with stereotypical markers of femininity. Our analysis of high-frequency stockout and price data from a leading global fashion retailer spans from January 2017 to December 2018 and covers 32 countries, or 89% of the Organization for Economic Cooperation and Development (OECD) population. Using a triple-difference approach across time, countries, and products, we identify changes in product-level stockouts, corresponding to a drop in the purchase of stereotypically “feminine” items. Our findings suggest a sudden shift in demand, with no immediate adjustments in product assortments or pricing. We discuss potential driving mechanisms, as well as implications for product management and marketing in marketplaces where segmentation is gender based. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.02352 .

The Role of Nudges and Behavioral Interventions in Financial Decision Making

Financial decision-making, both at individual and institutional levels, plays a critical role in determining economic outcomes. Traditional economic theory posits that individuals are rational agents who make decisions based on complete information and a consistent set of preferences. However, behavioral economics has challenged this notion, highlighting cognitive biases, heuristics, and social influences that can drive suboptimal decisions. Nudges and behavioral interventions have emerged as tools to guide individuals toward better financial choices without restricting their freedom of choice. The purpose of this research is to present a descriptive investigation of behavioral interventions and nudges in financial decision-making. The main cognitive biases influencing financial behavior are first described, and then several nudge kinds and their applicability in diverse financial contexts— retirement savings, debt management, spending control, and investment decisions—are explored. Along with reviewing empirical data on nudges' efficacy, the paper addresses the ethical issues surrounding their application and pinpoints the variables that affect their effectiveness. This study aims to educate consumers, financial institutions, and policymakers about the potential advantages and constraints of behavioral interventions by providing a thorough overview of how nudges might impact financial decision-making. Keywords: Nudges, Behavioral Intervention, Financial Decision-Making, Cognitive Biases, Financial Literacy.

LOSS AVERSION: THE UNSEEN FORCE SHAPING INVESTMENT DECISIONS

This research paper aims to investigate the profound impact of loss aversion on individual investment decision-making, with a specific focus on its influence on risk preferences. Loss aversion, a key concept in behavioral economics, posits that individuals experience a greater psychological impact from losses than equivalent gains, thereby shaping their decision-making processes. The study employs an empirical approach, utilizing a diverse sample of individual investors to analyze how loss aversion interacts with risk preferences and influences investment choices. The research methodology involves a combination of surveys and data analysis to explore the intricate relationship between loss aversion and risk preferences. By examining real-world investment decisions in various market conditions, the study seeks to identify patterns and behavioral tendencies that emerge when individuals confront potential losses in their investment portfolios. The research design also considers demographic factors, financial literacy, and other relevant variables to provide a comprehensive understanding of the factors influencing investment choices. Ultimately, this study aims to enhance our comprehension of the psychological factors driving individual investment decisions and to inform the development of strategies that mitigate the negative impacts of loss aversion on financial outcomes.

Cognitive Biases in Financial Decisions Made by Teenagers

Teenagers are a vital part of the economy today and make up a large proportion of the consumer industry. In a highly digitalised world, teenagers and adolescents have a strong and active presence on social media and influencers and marketers are reaching out to this demograph who are now a backbone in the decision making process in most families. Behavioral Economics, a relatively recent branch of the science, unlike traditional approaches which believe that people make economic and financial decisions on utility, suggests that financial decisions are more likely to be made by people on the basis of their inherent cognitive biases, their sense of fairness and psychological biases such as loss aversion and overconfidence bias. This study aims to extend this hypothesis to study adolescent and teenage behavioural patterns and answer the question how.

On the limited damp-proofing of residential buildings: do social norms matter?

PurposeThis study draws on neoclassical and behavioural economics theories to provide an empirical insight into the effect of knowledge, costs, and social norms on damp-proofing residential buildings in Ghana.Design/methodology/approachThis study used the quantitative approach involving survey data. A sample size of 242 participants was involved in the study. Applying principal component analysis on the responses from the participants, an index for damp-proofing, cost, knowledge, and social norms was derived. After generating the indexes, the ordinary least squares (OLS) regression was applied to estimate the impact of knowledge, costs, and social norms on damp-proofing.FindingsThe results from the OLS regression revealed that knowledge has a significant positive effect on damp-proofing while costs and social norms have significant negative effect on damp-proofing in Ghana. This study, therefore, concludes that although neoclassical economic factors such as knowledge and cost affect behaviour (damp-proofing), behavioural factors such as social norms also matter.Practical implicationsThe outcome of this study calls for policymakers to consider putting in place measures that increase knowledge and promote the use of damp-proofing techniques during the construction of buildings. In addition, the study calls for scholars to partake in collaborative research amongst disciplines such as economics, psychology, and the construction industry in order to provide more innovative solutions, the key of which is finding innovative ways to damp proof buildings.Originality/valueThis study is original in its context as it draws on neoclassical and behavioural economics theories to provide an empirical insight into the effect of knowledge, costs, and social norms on damp-proofing of residential buildings in Ghana. This is an area that has received less attention in the areas of building biology and building pathology globally.

Kinks as Goals: Accelerating Commissions and the Performance of Sales Teams

Piecewise-linear reward schemes are very common in workplaces; by definition, they divide the set of possible performance levels into disjoint intervals that could have psychological value to workers. When these schemes take the form of lump-sum bonuses, any psychological rewards associated with attaining a performance interval are hard to distinguish from material ones because both material and psychological incentives predict bunching at the output needed to earn the bonus. To disentangle these effects, this paper studies a common but understudied class of piecewise-linear pay—accelerators—in which the mechanisms’ predictions conflict. Using the distributions of daily sales in 103 small retail teams, we find that daily sales bunch at accelerators, which is inconsistent with models in which only material rewards matter. Combining simple theoretical models, institutional evidence, and heterogeneity analyses, we argue that this unexpected bunching results from teams’ decisions to use the convenient, salient kink points as shared goals, which yield symbolic utility to their members when the points are attained. This paper was accepted by Lamar Pierce, behavioral economics and decision analysis. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01661 .

Building Student Sustainability Competencies through a Trash-Practice Nudge Project: Service Learning Case Study in Kuwait

This discussion describes an experimental behavioral economics class implemented in a service learning format. Students implemented two nudge interventions to influence public trash behavior, which is an issue throughout the Middle East/North Africa (MENA). The aim in one project was to encourage more use of trash bins in a multi-screen theater and in the other to sort plastic, glass, and paper when throwing trash in the public bins at a university. These two organizations paid the implementation costs, which were quite low, as common for most nudges. The class was co-taught by two university faculty and several personnel from governmental and UN offices responsible for building nudge capabilities in Kuwait. In each case, results in the student projects demonstrated that nudging resulted in a substantial improvement. Students gained strong competencies in applying sustainability principles to a specific problem and in carrying out a real-world project. They learned the importance of collaborating with stakeholders and got to see that their work was actually used in policy formation by the Kuwait government and the UNDP’s Kuwait office.

Adam Smith, human betterment, and his erroneous indentification with self-interested human action

In this essay I discuss the proposition that Adam Smith has been widely misinterpreted as asserting in his second book, The Wealth of Nations, that emergent modern economies are driven by the strictly selfish motives of their human inhabitants. The propositions articulated in his first book, The Theory of Moral Sentiments, which offered a theory of society, extended seamlessly into his second book, and continued to be part of his theory of economy. In both works, he distinguished the universal state of being self-interested from actions taken in one's self-interest, and modeled people as creating and following rules of propriety that enabled them to better get along with their neighbors. This distinction explains why, in his second book, he refers to people following their “own interest” in their “own way” explicitly avoiding any suggestion that people pursued only their strictly selfish interests in the process of wealth creation. That cautionary effort failed, although Smith continues to be a spectacularly successful theorist of society and economy, especially of interest to scholars in behavioral and experimental economics.

Examining the Status Quo Bias for the Recent Global Economic Crisis: The Case of Türkiye

The objective of this paper is to investigate the "status quo bias,” which is a key concept in behavioral economics, using macroeconomic data from the recent economic crisis in Türkiye. The current global economic situation provides a favorable opportunity to analyze this idea, as there are abundant and relevant inputs for this type of study. Specifically, this paper analyzes the nexus between consumption and income before and after the economic crisis that triggered by the Covid-19 pandemic in Türkiye, with the aim of examining the "status quo bias” by employing ARDL Bounds Test. The analysis findings support that Türkiye has exhibited status quo bias for the period from 2013 to 2022. This research fills a gap in the literature by presenting evidence that Türkiye, a country that has been overlooked in the field of behavioral economics, exhibits the status quo bias in the context of recent economic crisis triggered by the Covid-19 outbreak.

Behavioral Design in Healthcare: Synthesis of Technical Sciences and Humanities

The scientific and practical potential of behavioral economics and behavioral design in Russia is underutilized, and the use of their methods can be significantly expanded, both in the scientific field and in practice. One of the promising areas of their application, with significant experience accumulated in the West, is healthcare. Behavioral design in healthcare is an example of an effective synthesis of the achievements of the humanities and technical sciences with an interdisciplinary approach that constructively combines economic, psychological, and technological methods of scientific knowledge. The use of behavioral design technologies, including digital and neural interfaces, is a promising direction for creating competitive products and services in healthcare. The theory of solving inventive problems can help speed up the process of implementation in practice. Behavioral design technologies in healthcare can be considered from such positions as physical design – the design of medical equipment, devices, and drug labels – as well as design for error-proofing in organizing processes based on reducing the negative impact of the human factor. The behavioral design of error-proofing systems in healthcare is implemented through functions such as forced control, error failure, warning, and touch alert.

C-frame thinking: Embedding behavioral economics into ecological economics

This paper aims to explore opportunities for integrating Behavioral Economics (BE) into Ecological Economics (EE). By examining the frames of analysis for both disciplines, this study categorizes BE as operating at the individual level (i-frame), while EE addresses systemic aspects of society (s-frame) and extends its considerations to the biosphere (n-frame), advocating for collective action through bottom-up intermediate-level interventions (c-frame).The study posits that EE can benefit from BE’s rich insights into human behavior and decision-making, especially for c-frame action strategies. However, integrating these disciplines requires finding common ontological and epistemological ground to avoid eclecticism and methodological flaws. The integration is approached in two steps: first, adapting BE epistemology to the systems thinking approach of EE, and second, addressing the ontological gap in BE regarding the world surrounding the individual. This paper argues that embedding BE within EE’s ontology points to the necessity of c-frame thinking for human decision-making.A case study of the ex-GKN factory in Italy demonstrates the practical benefits of c-frame thinking in a complex decision process. An alliance of workers, researchers, and civil society movements collaboratively developed a future plan that considered the needs of all stakeholders, showcasing the effectiveness of collective action.

Effectiveness of an mHealth App That Uses Financial Incentives and Gamification to Promote Health Behavior Change in Adolescents and Caregivers: Protocol for a Clinic-Based Randomized Controlled Trial.

Adolescent and adult obesity continues to be a public health epidemic in the United States. Despite the popularity of mHealth apps with gamification among adolescents, there are insufficient studies to evaluate the efficacy of gamified mHealth apps and financial incentives to motivate sustained health behavior change in adolescents or their adult caregivers. This study aims to evaluate the effectiveness of gamification techniques and financial incentives used in the novel "CommitFit" mHealth app to motivate health behavior change and improve various mental and physical health metrics in adolescents and their caregivers. This study is a 3-month randomized controlled trial (RCT) with 30 adolescents (aged 13-15 years) and their adult caregivers (N=60). It evaluates "CommitFit," which uses gamification including points and leaderboards to motivate logging and achievement of self-selected health behavior goals (eg, more water, sleep, physical activity, fruits, or vegetables or fewer sugary beverages). The RCT had three arms, each with 10 dyads: (1) CommitFit-only users; (2) CommitFit$, where adolescents were paid US $0.05 for each point they earned; and (3) waitlist control. Intervention dyads used the app for 3 months and had the option to use it for the fourth month without prompts or extra financial incentives. User analytic software was used to evaluate the frequency of user logs and goal achievement. Monthly surveys evaluated self-reported change in the 5 CommitFit health behaviors. Changes in BMI and blood pressure were evaluated for all participants at 3 clinical visits. Mental health, gamification, and behavior economics surveys were completed during the clinical visits. Recruitment began in August 2023 and was completed in 10 weeks. The research team successfully recruited and enrolled 30 dyads. Researchers emailed and called 89 caregivers on a physician-approved adolescent patient list, a 33% recruitment rate. Data collection and analysis will be conducted in the spring and summer of 2024. The results of this study are anticipated to be published between late 2024 and early 2025. This RCT will expand knowledge of the effectiveness of gamification techniques, financial incentives, and mHealth apps to motivate sustained health behavior change among adolescents and caregivers. These results may offer new opportunities to caregivers, health insurers, health care systems, and clinicians to motivate health behavior change in adolescents and caregivers, with the ultimate goal of preventing or reducing obesity and obesity-related diseases. Additional gamification, mental health surveys, and app user analytics included in the study may provide further insight into the characteristics of adolescents or caregivers who would benefit the most from using a gamified mHealth app like CommitFit. DERR1-10.2196/63505.