Behavioral Economics Research Articles

Promoting Decision Making and Behavioral Change: Application of Psychology and Behavioral Economics to Nudge Design

Nudge design is a design approach that uses people’s psychological preferences and cognitive limitations to guide people to make choices. The theoretical basis of nudge design mainly comes from psychology and behavioral economics, among which limited rationality theory, cognitive behavior theory, and Fun theory are important theoretical frameworks. This paper summarizes the basic contents of these three theories and their application examples in nudge design. By analyzing the relevant cases of nudge design, the application effects of these three theories in different fields and scenarios are expounded, such as public transportation, environmental protection, health management, education and training, etc., to provide reference and enlightenment for the theory and practice of nudge design.

Does Online Fundraising Increase Charitable Giving? A Nationwide Field Experiment on Facebook

Does online fundraising increase charitable giving? Using the Facebook advertising tool, we implemented a natural field experiment across Germany, randomly assigning almost 8,000 postal codes to Save the Children fundraising videos or to a pure control. We studied changes in the donation revenue and frequency for Save the Children and other charities by postal code. Our geo-randomized design circumvented many difficulties inherent in studies based on click-through data, especially substitution and measurement issues. We found that (i) video fundraising increased donation revenue and frequency to Save the Children during the campaign and in the subsequent five weeks, that (ii) the campaign was profitable for the fundraiser, and that (iii) the effects were similar independent of video content and impression assignment strategy. However, we also found some crowding out of donations to other similar charities or projects. Finally, we demonstrated that click data may be an inappropriate proxy for donations and recommend that managers use careful experimental designs that can plausibly evaluate the effects of advertising on relevant outcomes. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Funding: M. Adena acknowledges financial support from the Deutsche Forschungsgemeinschaft [Grants 417014946 and CRC TRR 190 (Project 280092119)]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2020.00596 .

Investor heterogeneity and global stock market participation

To what extent does investor heterogeneity influence decision to invest in stock market? We address this question by drawing on the behavioural economics literature and analyse the impact of national culture on stock market data of forty seven countries spanning from 2000 to 2022. Our findings demonstrate that investors’ heterogeneity significantly accounts for the variation in stock market participation and the results remain consistent despite many robustness checks.

BEHAVIORAL ECONOMICS & SOCIAL MEDIA: TO WHAT EXTENT DOES CONTENT CONSUMPTION ON INSTAGRAM REELS AFFECT CONSUMER BEHAVIOR AND SPENDING PATTERNS FOR GEN-ZS?

This research explores the impact of Instagram Reels on consumer behavior and spending patterns, particularly within the Gen-Z demographic. The study hypothesizes that Gen-Z, being more active on Instagram, would spend more on products advertised through the platform compared to older generations. A survey was conducted, targeting two groups: those who primarily use Instagram and allocate more of their budget to purchases rather than savings, and those who do not. Contrary to the initial hypothesis, the survey results indicated that older demographics, such as Millennials and beyond, were more likely to purchase items advertised on Instagram, particularly clothes, accessories, and shoes. The study utilizes theories from behavioral economics, including Maslow’s Hierarchy of Needs, Nudge Theory, and the theory of Bounded Rationality, to explain consumer choices. However, these theories fall short in accounting for the diverse and unique behaviors of individual consumers. The findings suggest that while Gen-Z engages heavily with Instagram content, it is the older users who are more susceptible to the platform's advertisements. The study highlights the complexity of consumer behavior and the limitations of existing economic theories in predicting spending patterns influenced by social media.

Advancing financial crisis prediction: Big data, AI, and economic theories

This paper explores the theoretical foundations of financial crisis early warning systems, focusing on the integration of big data, ensemble learning, and various financial crisis theories. It begins with defining key concepts such as big data, financial crisis, and ensemble learning, highlighting the evolution and significance of these terms in the context of financial crisis management. The literature review covers extensive research on financial crisis early warning indicators and models, tracing the development from traditional statistical methods to advanced artificial intelligence approaches, including neural networks, decision trees, and machine learning algorithms. The paper critically assesses the current methodologies and emphasizes the necessity of incorporating big data and machine learning for more accurate and comprehensive early warning systems. Theoretical foundations related to financial crises, such as information asymmetry, behavioral economics, economic cycle theory, and contingency theory, are discussed to understand their impact on financial crisis prediction and management. The conclusion synthesizes the findings and suggests future research directions, emphasizing the integration of diverse methodologies and interdisciplinary approaches to enhance the early warning capabilities of enterprises.

Cell-Type-Specific Regulation of Cocaine Reward by the E2F3a Transcription Factor in Nucleus Accumbens.

The development of drug addiction is characterized by molecular changes in brain reward regions that lead to the transition from recreational to compulsive drug use. These neurobiological processes in brain reward regions, such as the nucleus accumbens (NAc), are orchestrated in large part by transcriptional regulation. Our group recently identified the transcription factor E2F3a as a novel regulator of cocaine's rewarding effects and gene expression regulation in the NAc of male mice. Despite this progress, no information is available about the role of E2F3a in regulating cocaine reward at the sex- and cell-specific levels. Here, we used male and female mice expressing Cre-recombinase in either D1- or D2-type medium spiny neurons (MSNs) combined with viral-mediated gene transfer to bidirectionally control levels of E2F3a in a cell-type-specific manner in the NAc during conditioned place preference (CPP) to cocaine. Our findings show that selective overexpression of E2F3a in D1-MSNs increased cocaine CPP in both male and female mice, whereas opposite effects were observed under knockdown conditions. In contrast, equivalent E2F3a manipulations in D2-MSNs had no significant effects. To further explore the role of E2F3a in sophisticated operant and motivated behaviors, we performed viral manipulations of all NAc neurons in combination with cocaine self-administration and behavioral economics procedures in rats and demonstrated that E2F3a regulates sensitivity aspects of cocaine seeking and taking. These results confirm E2F3a as a central substrate of cocaine reward and demonstrate that this effect is mediated in D1-MSNs, thereby providing increased knowledge of cocaine action at the transcriptional level.

Conservative Theory of Expanding Supervision Compensation from the Perspective of Behavioral Economics

Based on the reflection on the traditional theory of expanding compensation, protecting human rights, and urging the exercise of rights, using cybernetics and behavioral economics tools, the expansion of supervision compensation will make market norms erode social norms, coupled with the confrontational sense of the subject and object of compensation. According to empirical research, it has been proved that inspection compensation will be further transmitted into a disguised “redemption” claim. On the contrary, it loses the basic proof in general jurisprudence and welfare school. Based on acknowledging the “post-welfare school” and general jurisprudence, in order to increase the marginal amount of social welfare, safeguard human rights and promote the return of legal order, inspection compensation should be treated conservatively, including refinement, orderly limitation, and policy-oriented compensation and relief substitution.

CAN TASTE AND PRESENTATION OF RESTAURANT MENUS CHANGE CUSTOMERS' HEALTH KNOWLEDGE AND PERCEPTIONS? A NATURAL RESTAURANT FIELD EXPERIMENT

This study examines the impact of menu taste and presentation on customers’ health knowledge and perceptions using behavioral economics in a restaurant setting. The increasing prevalence of non-communicable diseases (NCDs) and obesity highlights the importance of dietary choices for health outcomes. Using a natural field experiment involving 349 participants in Chiangmai, Thailand, this study examines how experiments taste and alterations in menu design, specifically through convenience and visibility interventions, can encourage healthier meal selections. The experiment shows that taste significantly influences the perception of meal healthiness, while strategic menu presentation influences customers' meal choices and their ability to accurately estimate caloric content. The findings suggest that making high-calorie options more visible tends to lead participants towards choices with higher caloric content than estimated, indicating the potential of menu design in modifying consumer behavior towards healthier eating habits. Additionally, the study examines demographic factors such as age, gender, and Body Mass Index (BMI), alongside self-reported dietary practices, to understand their influence on meal selection decisions. This study contributes to behavioral economics by providing empirical evidence on how small changes in the food environment can promote healthier diets, addressing the global challenge of tackling non communicable diseases and obesity.

How Framing Influences Strategic Interactions

In many settings, a person’s outcome depends not only on her own behavior, but also on her counterpart’s. Such strategic decisions have traditionally been studied using normative game theory, which assumes that people adopt equilibrium strategies and will reach the same decision, regardless of how the problem is described (framed). We examine a potentially important type of framing effect—focusing on how the relationship between players’ actions generates joint outcomes. Any strategic interaction can be described by either spelling out the outcomes of all possible action combinations (which we call “outcome framing,” or simply “O-framing”) or describing what will happen if different players choose the same action or choose different actions (which we call “relation framing,” or simply “R-framing”). O-framing has been the typical way to describe a strategic problem in prior work, whereas R-framing is commonly employed in real-life communications. We propose that these functionally equivalent frames induce different psychological processes and lead to different decisions: Relative to O-framing, R-framing increases players’ beliefs about their counterparts’ likelihood of coordinating on a cooperative option. We demonstrate this effect in the context of classic games such as the Prisoner’s Dilemma and the Stag Hunt. We find that, compared with O-framing, R-framing significantly increases people’s likelihood to choose the action that maximizes collective benefits rather than individual interests, and it does so by increasing beliefs that one’s partner will choose the same action as well. We derive conditions when this effect is likely to emerge and discuss the managerial implications of this research. This paper was accepted by Yuval Rottenstreich, behavioral economics and decision analysis. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00518 .

Behavioral economics and business: revolution or reinforcing norms?

Behavioral economics and business: revolution or reinforcing norms?

Information search process model based on costs and benefits: a behavioural economics perspective

PurposeThis study constructed an information search process model based on costs and benefits to reflect different information search processes under different decisions from a behavioural economics perspective.Design/methodology/approachThis study used a deductive approach to conceptualise the costs, benefits, and uncertainties of the information search process. Subsequently, we constructed an information search process model based on the costs and benefits using graphical reasoning, loss aversion theory, bounded rationality theory, the satisficing theory of behavioural economics, and the uncertainty changes of information search process.FindingsThe model revealed four types of user behaviours in the information search process: (1) avoiding search at the initiation of the search process; (2) exiting in the middle of a search; (3) stopping at the point of satisficing; and (4) continuing the search until experiencing physical discomfort.Originality/valueThe model constructed in this study treats the information search as a process based on costs and benefits with uncertainty. This model integrates information search avoidance and stopping into an information search process model. The model identifies users’ bounded rationality by evaluating ideal and real situations. Moreover, the model explains relative and absolute information overloads and the area beyond the user’s bounded rationality. These findings could help improve users’ information literacy and optimise information systems.

Will the US Dollar Hegemony as the World Reserve Currency Be Replaced? An Exploratory Study

Abstract The understanding of the behavioral economics of how the US$ has been performing as an international reserve currency since 1945 seems to face a serious threat posed by the BRICS coalition nowadays. The study aimed to assess the long-term stability of the US dollar as an international reserve currency in light of the emerging challenge from the BRICS coalition. The research used ARDL and ECM analysis to address two main questions. First, the study confirmed that the US dollar’s long-term equilibrium as a reserve currency is stable. Second, it found that the US economic and monetary infrastructure appeared more resilient than that of the BRICS countries. This suggests that a shift away from the US dollar as a world reserve currency is not likely in the near future. The study also raised the need to consider designing a better monetary system for the modern world.

Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions

Abstract Experimental research in behavioral economics focuses on consumer behaviors. Similar experimental research on profit-maximizing producers is rare. In three field experiments involving commercial agricultural producers in the United States, we detect evidence of anchoring in competitive auctions for conservation contracts related to nutrient and pest management that were worth, on average, nearly $9,000. In these auctions, the value of the starting cost-share bid was randomized to be either 0% or 100%. When the starting value was 100%, final bids were 46% higher, on average. We find weak evidence that experience with conservation contracts may modestly attenuate the anchoring effect.

Savings behavior among low-income individuals in Nigeria: a behavioral economics perspective

Low-income individual's savings behavior is of essence in economics and development studies, more so in developing countries like Nigeria. This study considers low-income earners in Nigeria, looking at their savings behavior from the perspective of behavioral economics, with regard to economic incentives, psychological factors, and socio-cultural influences. In this qualitative study, data were collected through in-depth interviews among low-income earners in Nigeria. The data analysis was done using methods to identify major factors that affect savings behavior. The present study finds that low-income people in Nigeria display saving behavior for a variety of factors. It is driven by economic incentives, including access to formal financial services and competitive interest rates. Subject to several psychological factors, such as loss aversion and present bias. Socio-cultural norms influence individual savings efforts through traditional savings practices and community obligations. Moreover, low financial literacy and, accordingly, limited accessibility of financial education are major barriers to effectively saving among this category of people. The findings add to the literature available on household finance and poverty alleviation in Nigeria and other developing countries. It provides valuable insights for policymakers, financial institutions, and development practitioners in creating tailored interventions and financial products that would meet specific needs among low-income earners. The findings of this study unveil the potential of savings to absorb economic shocks, finance productive assets, and increase the level of financial inclusion amongst poor communities meaning that adopting integrated measures—economic, psychological, and socio-cultural—enhances the weak saving habits of low-income earners in Nigeria.

The seven ‘C’s of strategic pricing in international markets

This paper introduces a conceptual framework addressing the complexities of pricing strategies in international markets, focusing on pivotal elements such as customer value, the impact of technological advancements, and the harmonisation of global and local strategies. An examination of existing literature and diverse pricing models reveals how the interplay between digitisation and global market dynamics necessitates innovative pricing approaches. These approaches must navigate specific challenges, including the accessibility of digital goods and the intricacies of information preservation costs. Emphasising the importance of distinguishing a company’s offerings from its competitors, the framework advocates for tailored distribution strategies that meet local market needs while maintaining global standards, alongside compliance with international legal pricing frameworks. The framework elaborates on the critical role of deep customer understanding and strategic branding in significantly boosting a company’s profitability and enhancing customer satisfaction across various geographical markets. It further integrates contemporary insights on the agility and adaptability required in pricing strategies amid market fluctuations, the application of behavioural economics principles in pricing, and the strategic employment of analytics to refine pricing decisions. Highlighting the dynamic nature of pricing that accommodates cultural sensitivities, the framework encourages innovation and a careful balance between widespread market reach and localised relevance. Offering strategic insights, this conceptual exploration aids businesses in navigating the intricacies of pricing within the digital era and the expanding global marketplace. It underscores the substantial benefits for business practitioners, including enhanced clarity in pricing decisions, facilitation of competitive differentiation, and alignment with broad business objectives. For marketers aiming to engage with the multicultural consumer markets of the 21st century, this framework serves as a crucial tool, elevating cultural comprehension and promoting product innovation tailored to diverse consumer groups. The paper concludes by emphasising the broader implications for international business practices, advocating for a strategic blend of scalability and customisation to achieve sustainable growth in the global economy.

Strategic Synergies: Unveiling the Interplay of Game Theory and Cultural Dynamics in a Globalized World

This literature review focuses on cultural-related studies and game theory. First of all, it analyzes how social dynamics and strategic interactions can be shaped by different cultural environments. Secondly, it examines how cultural norms can affect strategic decision making and how game theory could predict cooperations and conflicts. Overall, this study aims to highlight the applicability of game theory in the modeling of cultural transformation and its interaction with behavioral economics. Moreover, this study also attempts to underscore the significance of game theory and cultural diversity in communication methods, plus the process of policy formulation. In addition to the above topics, the robustness of cross-cultural social norms, the economic study of different cultural heritage, and the cultural effects of tourism under game theory are also focal points of this study. Finally, this review delves into how game theory can represent social interactions, emphasizing the need to incorporate extensive cultural knowledge in order to enhance the efficacy of game-theoretic model’s applications.

DECODING CONSUMER CHOICES: THE INTERSECTION OF BEHAVIORAL ECONOMICS AND MARKETING STRATEGIES

This study explores how psychological factors influence consumer choices and marketing strategies through the lens of Behavioral Economics. By examining cognitive biases, heuristics, and emotional triggers, the research provides insights into consumer decision-making. Using real-world case studies and empirical data, the paper demonstrates how these factors can be integrated into effective marketing strategies. By bridging theory and practice, the study aims to enhance marketers' understanding of subconscious consumer preferences, leading to more tailored and resonant campaigns. Ultimately, this research contributes to the field by combining Behavioral Economics and marketing insights, offering a guide for businesses to create stronger connections with consumers and foster mutually beneficial relationships

Power through design – dark patterns, personalization and the emergence of TikTok

ABSTRACT This paper examines the role of dark patterns in the context of TikTok, an emerging social media platform. Drawing on principles from behavioral economics and the existing literature on online choice architecture (OCA), the study investigates how TikTok utilizes choice architecture, namely, dark patterns to engage users and explores the potential implications for data protection, algorithmic practices and market dynamics. The paper employs the "walkthrough method" to conduct a case study, describing the TikTok user experience and mapping potential dark patterns employed by the app. Based on the case study, it discusses the challenges in classifying dark patterns (specially as it depends on the user impact) against legitimate commercial practices. Finally, it describes how dark patterns and OCA have been discussed in the Latin American legal landscape, and finally it proposes next steps for the debate based on the findings of the article..

WonderWoods Online Furniture Website

Abstract: The proliferation of digital platforms and the exponential growth of data have led to an overwhelming abundance of information, necessitating innovative solutions to assist individuals in navigating this landscape. In response to this challenge, advice generator applications have emerged as a promising tool for delivering personalized recommendations and guidance tailored to the unique needs and preferences of users. Leveraging artificial intelligence and data analytics, these applications analyze user inputs and contextual factors to generate actionable insights across various domains. This abstract provides an overview of the landscape of advice generator applications, exploring their functionalities, significance, and implications within the realm of research. Additionally, it highlights the role of these applications in facilitating individual empowerment, enhancing decision-making processes, and informing future studies in fields such as psychology, behavioral economics, and artificial intelligence. Through a comprehensive analysis of advice generator applications, this research paper seeks to contribute to a deeper understanding of their potential impact on society and the broader research landscape. Keywords : Advice generator app gives the advice what to do or not by using this app.

Network spillover effects associated with the ChooseWell 365 workplace randomized controlled trial to promote healthy food choices

Food choices are closely linked to culture, social relationships, and health. Because many adults spend up to half their time at work, the workplace provides a venue for changing population health-related behaviors and norms. It is unknown whether the effects of a workplace intervention to improve health behaviors might spread beyond participating employees due to social influence. ChooseWell 365 was a randomized controlled trial testing a 12-month healthy eating intervention grounded in principles of behavioral economics. This intervention leveraged an existing cafeteria traffic-light labeling system (green = healthy; red = unhealthy) in a large hospital workplace and demonstrated significant improvements in healthy food choices by employees in the intervention vs. control group. The current study used data from over 29 million dyadic purchasing events during the trial to test whether social ties to a trial participant co-worker (n = 299 intervention, n = 302 control) influenced the workplace food choices of non-participants (n = 7900). There was robust evidence that non-participants who were socially tied to more intervention group participants made healthier workplace food purchases overall, and purchased a greater proportion of healthy (i.e., green) food and beverages, and fewer unhealthy (i.e., red) beverages and modest evidence that the benefit of being tied to intervention participants was greater than being tied to control participants. Although individual-level effect sizes were small, a range of consistent findings indicated that this light-touch intervention yielded spillover effects of healthy eating behaviors on non-participants. Results suggest that workplace healthy eating interventions could have population benefits extending beyond participants.