Work In Behavioral Economics Research Articles

Interactive effects of social norms and information framing on consumers' willingness of food waste reduction behavior

Nudge theory is the underpinning theory of this paper, which is used to propose the information nudge strategy for reducing food waste on the consumption stage. To achieve desired outcomes, a 2 (Social Norms: Descriptive norms vs. Injunctive norms) × 2 (Information framing: Positive framing vs. Negative framing) × 2 (Dining Scenarios: Business banquets vs. Friends and family gatherings) between-subjects experimental design was employed, based on the framing effect and the focus theory of normative conduct. Specifically, building upon prior work in behavioral economics, this paper explores the ‘match-up ’effects between social norms and information framing on consumers' willingness to reduce food waste, considering the mediating role of portion control inspiration and the moderating role of dining scenarios. Results suggest that negative-framed messages are more effective combined with injunctive norms, while positive-framed messages work better combined with descriptive norms. Noticeably, the negative-descriptive norms have the backfire effect, that is, exacerbating individuals' food waste. The dining scenarios(business banquets vs. family/friends gatherings)influence these effects. Overall, this work contributes to the literature on nudge theory and the focus theory of normative conduct by investigating how information nudge strategies can be used to promote rational meal ordering and food waste reduction at social and enterprise levels.

Stress may increase choice of sooner outcomes, but not temporal discounting

Recent work in behavioral economics has shown that stress increases choices of smaller, sooner gains relative to larger, later monetary gains. The simplest model that explains these findings is one in which stress increases the discount rate or present bias. A sharp test of this model is provided by intertemporal choices in the losses or effort domain: this model predicts that stress should lead to increased choice of larger, later losses or effortful tasks relative to smaller, earlier ones. Here we show suggestive evidence for the opposite result: using a laboratory experiment with 578 participants from informal settlements in Nairobi, Kenya, we find that stress increases choices of smaller, sooner outcomes across domains. Specifically, we show that the effect is present in monetary gains and losses, and effortful tasks; and for both a psychosocial stressor (Trier Social Stress Test), and the pharmacological elevation of stress hormone levels using hydrocortisone. Importantly, the results are statistically robust only in the absence of clustering, and should thus be regarded as tentative. However, they are at least initially consistent with a model in which stress increases discounting in the gains domain but decreases it in the losses and effort domains; or with a model in which stress decreases the utility of any future outcome. Thus, stress may affect intertemporal choice, but may do so through mechanisms other than a simple increase in discount rates or present bias.

The moderating role of childhood socioeconomic status on the impact of nudging on the perceived threat of coronavirus and stockpiling intention

Communications that include nudges and framing strategies are ubiquitous in our daily lives. In this paper, we investigate how different nudging strategies during a public health campaign, particularly supplementary information and statistics, influence perceptions of threat and stockpiling intentions, while also considering the role of childhood socioeconomic status. Specifically, building upon prior work in behavioral economics, we hypothesize that the presence of additional statistics elicits lower perceived threat and intention to stockpile. In addition, we predict find that the childhood socioeconomic status of individuals influences these effects. Three studies offer evidence for those predictions and demonstrate the importance of message framing in uncertain circumstances. Overall, this work contributes to the literature on nudging and life history theory by investigating how communication strategies can be used to increase or decrease perceived threat in order to achieve desired outcomes (e.g., limiting stockpiling or respecting social distancing).

A more dynamic understanding of human behaviour for the Anthropocene

Human behaviour is of profound significance in shaping pathways towards sustainability. Yet, the approach to understanding human behaviour in many fields remains reliant on overly simplistic models. For a better understanding of the interface between human behaviour and sustainability, we take work in behavioural economics and cognitive psychology as a starting point, but argue for an expansion of this work by adopting a more dynamic and systemic understanding of human behaviour, that is, as part of complex adaptive systems. A complex adaptive systems approach allows us to capture behaviour as ‘enculturated’ and ‘enearthed’, co-evolving with socio–cultural and biophysical contexts. Connecting human behaviour and context through a complex adaptive systems lens is critical to inform environmental governance and management for sustainability, and ultimately to better understand the dynamics of the Anthropocene itself. To understand and address sustainability problems, a complex model of human behaviour is proposed, one that co-evolves with their context, as opposed to simpler models.

Mistaken about mistakes

Theoretical work in behavioral economics aims to modify assumptions of standard neoclassical models of individual decision-making to better comport with observed behavior. The alternative assumptions fall into at least two categories: non-standard preferences and psychological mistakes. Applications of behavioral economics models in law, however, tend to assume that deviations from standard neoclassical models are meant to build in psychological mistakes that produce regrettable choices. Often follow-on policy prescriptions suggest interventions that either help individuals choose correctly or go further to substitute the “correct” choices for those that mistake-prone individuals might choose in error. Such policy prescriptions are ill suited in cases where the applied behavioral economics model assumes non-standard preferences as opposed to psychological mistakes. This essay provides examples of models in each category and examples of mistaken applications of models that assume non-standard preferences rather than psychological mistakes. It also suggests ways to avoid errors when applying behavioral economics theories in law.

Testing probabilistic models of choice using column generation

In so-called random preference models of probabilistic choice, a decision maker chooses according to an unspecified probability distribution over preference states. The most prominent case arises when preference states are linear orders or weak orders of the choice alternatives. The literature has documented that actually evaluating whether decision makers’ observed choices are consistent with such a probabilistic model of choice poses computational difficulties. This severely limits the possible scale of empirical work in behavioral economics and related disciplines. We propose a family of column generation based algorithms for performing such tests. We evaluate our algorithms on various sets of instances. We observe substantial improvements in computation time and conclude that we can efficiently test substantially larger data sets than previously possible.

Nudges in a post-truth world

Nudges—policy proposals informed by work in behavioural economics and psychology that are designed to lead to better decision-making or better behaviour—are controversial. Critics allege that they bypass our deliberative capacities,...

Striving for balance in economics: Towards a theory of the social determination of behavior

This paper is an attempt to broaden economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas in standard economics the concept of the decision-maker is the rational actor, and in early work in behavioral economics it is the quasi-rational actor influenced by the context of the moment of decision, in some recent work in behavioral economics, the decision-maker could be called the enculturated actor. This actor's preferences, perception, and cognition are subject to two deep social influences: (a) the social contexts to which he has become exposed and, especially, accustomed; and (b) the cultural mental models—including categories, identities, narratives, and worldviews—that he uses to process information. The paper traces how these factors shape behavior through the endogenous determination of preferences and the lenses through which individuals see the world—their perception and interpretation of situations. The paper offers a tentative taxonomy of the social determinants of behavior and describes the results of controlled and natural experiments that only a broader view of these determinants can plausibly explain. The perspective suggests more realistic models of human behavior for explaining outcomes and designing policies.

Rethinking Moral Agency in Markets: A Book Discussion on Behavioral Economics

AbstractRecent work in behavioral economics and psychology provides valuable resources for religious ethicists. This book discussion examines contributions by Cass Sunstein, Daniel Kahneman, George Akerlof and Rachel Kranton, Uri Gneezy and John A. List, and Douglas Hough. This literature raises important questions about ethical decision‐making, moral agency and responsibility, and the ethics of life in global capitalism. It also opens up promising areas for interdisciplinary dialogue between economics and religious studies. This book discussion concludes that religious ethicists have much to contribute to the conversations about moral anthropology that are now being held in behavioral economic research, and to the broader political economic debates in which this research participates.

The Big Man Mechanism: how prestige fosters cooperation and creates prosocial leaders.

Anthropological evidence from diverse societies suggests that prestige-based leadership may provide a foundation for cooperation in many contexts. Here, inspired by such ethnographic observations and building on a foundation of existing research on the evolution of prestige, we develop a set of formal models to explore when an evolved prestige psychology might drive the cultural evolution of n-person cooperation, and how such a cultural evolutionary process might create novel selection pressures for genes that make prestigious individuals more prosocial. Our results reveal (i) how prestige can foster the cultural emergence of cooperation by generating correlated behavioural phenotypes, both between leaders and followers, and among followers; (ii) why, in the wake of cultural evolution, natural selection favours genes that make prestigious leaders more prosocial, but only when groups are relatively small; and (iii), why the effectiveness of status differences in generating cooperation in large groups depends on cultural transmission (and not primarily on deference or coercion). Our theoretical framework, and the specific predictions made by these models, sketch out an interdisciplinary research programme that cross-cuts anthropology, biology, psychology and economics. Some of our predictions find support from laboratory work in behavioural economics and are consistent with several real-world patterns.

Uncertainty Without All the Doubt

AbstractI investigate whether degreed beliefs are able to play the predictive, explanatory, and modeling roles that they are frequently taken to play. The investigation focuses on evidence—both from sources familiar in epistemology as well as recent work in behavioral economics and cognitive psychology—of variability in agents' apparent degrees of belief. Although such variability has been noticed before, there has been little philosophical discussion of its breadth or of the psychological mechanisms underlying it. Once these are appreciated, the inadequacy of degrees of belief becomes clear. I offer a theoretical alternative to degrees of belief, what I call the filter theory.

Hyperbolic Time Discounting, Offender Time Preferences and Deterrence

Objectives This study examines the phenomena of intertemporal decision making—decisions involving costs and benefits that occur at different points in time. Two models of intertemporal time discounting are the exponential and hyperbolic models. Previous work in behavioral economics and psychology is relied on to make the case that the discounting of delayed outcomes (both gains and losses) may be hyperbolic rather than exponential.

What is the Right Amount of Choice?

A fundamental tenet of neoclassical economics is that more choice is good. More choices expand the possibilities set and can only lead to individuals finding outcomes that they prefer. Many econometric models of choice, such as the standard logit choice model, by definition have error structures that show an increase in welfare as choices increase. Yet what has been apparent to lay-people for many years has become clear to economists as well in recent years: too much choice can reduce welfare. A wide variety of papers in behavioral economics has shown how increasing the size of choice sets can reduce participation in the market. Other papers have shown consumers choosing clearly dominated options in choice environments, particularly the elderly who may face cognitive challenges in making appropriate choices. For example, in recent work with Jason Abaluck, I have found clear evidence that the substantial majority elders choosing prescription drug plans under the Medicare Part D plan do not choose the cost minimizing option. This existing literature suffers, however, from the standard problem with empirical work in behavioral economics: it clearly documents a positive anomaly, but leaves us with little normative guidance as to the policy implications. This research suggests that in a variety of contexts we may want to limit choice but how much? And, if choice is to be limited, should it be limited through simply reducing the number of options, or by restricting the space set in which suppliers can compete to provide a more organized choice framework?

The Behavioral Economics and Neuroeconomics of Reinforcer Pathologies: Implications for Etiology and Treatment of Addiction

The current paper presents a novel approach to understanding and treating addiction. Drawing from work in behavioral economics and developments in the new field of neuroeconomics, we describe addiction as pathological patterns of responding resulting from the persistently high valuation of a reinforcer and/or an excessive preference for the immediate consumption of that reinforcer. We further suggest that, as indicated by the competing neurobehavioral decision systems theory, these patterns of pathological choice and consumption result from an imbalance between two distinct neurobehavioral systems. Specifically, pathological patterns of responding result from hyperactivity in the evolutionarily older impulsive system (which values immediate and low-cost reinforcers) and/or hypoactivity in the more recently evolved executive system (which is involved in the valuation of delayed reinforcers). This approach is then used to explain five phenomena that we believe any adequate theory of addiction must address.

“In a Space of Questions”: A Reflection on Religion and Economics at the Beginning of the Twenty-First Century

Efforts to consider economic life from a religious perspective almost always run headlong into the conflict between utilitarian values, which are the cornerstone of modern economic analysis, and religious values, which are almost uniformly nonutilitarian. This essay looks at this conflict of values through the work of the moral philosopher Charles Taylor. While acknowledging the power of utilitarian analysis, Taylor shows that it treats only a subset of what is central to our ethical concerns. The essay looks back to the relationship between Tocqueville and John Stuart Mill and their views of the nature of economic analysis to try to see some of the power of Taylor's distinction. The essay concludes by looking at recent work in behavioral economics as evidence that economists can consider broader criteria than utility maximization in examining economic behavior. Only if economics can move beyond strict utilitarian analysis can it fully engage with the broad range of ethical concerns that underpin religious belief.

Behavioral Economics and the Conduct of Benefit-Cost Analysis: Towards Principles and Standards

As traditionally conducted, benefit-cost analysis is rooted in neoclassical welfare economics, which, in its most simplified form, assumes that individuals act rationally and are primarily motivated by self-interest, making decisions that maximize their welfare. Its conduct is evolving to reflect recent work in behavioral economics, which explores the psychological aspects of decisionmaking. We consider several implications for analyses of social programs, focusing largely on economic valuation. First, benefit-cost analysis often involves valuing nonmarket outcomes such as reductions in health and environmental risks. Behavioral research emphasizes the need to recognize that these values are affected by psychological as well as physical attributes. Second, benefit-cost analysis traditionally uses exponential discounting to reflect time preferences, while behavioral research suggests that individuals’ discounting may be hyperbolic. While the appropriate rates and functional form are uncertain, market rates best represent the opportunity costs associated with diverting funds to support a particular social policy or program. Such rates reflect the intersection between technological progress and individual preferences, regardless of whether these preferences fit the standard economic model or a behavioral alternative. Third, behavioral research emphasizes the need to consider the influence of other-regarding preferences on valuation. In addition to acting altruistically, individuals may act reciprocally to reward or punish others, or use the status of others as the baseline against which to assess their own well-being. Fourth, behavioral economics identifies factors that can help researchers develop valuation studies that provide well-informed, thoughtful preferences. Finally, while behavioral research has led some to argue for a more paternalistic approach to policy analysis, an alternative is to continue to focus on describing the preferences of those affected by the policy options while working to ensure that these preferences are based on knowledge and careful reflection. Benefit-cost analysis can be best viewed as a pragmatic framework for collecting, organizing, and evaluating relevant information.

The psychology and behavioural economics of poverty

The paper provides an overview and assessment of an emerging literature on the psychology and behavioural economics of poverty. We particularly highlight poverty experiences, role of neighbourhoods, poverty dynamics and transmission, child poverty and disability and personal finance. In addition we consider psychology and policy responses by looking and autonomy and empowerment, and poverty reduction programs. Our central thesis is that the detailed knowledge of individual experiences, cognitions and social factors in psychology and related social science complements the traditional economic emphasis on structural factors and policy instruments in a way that is exemplified by emerging work in behavioural economics. We conclude it is increasingly recognised that poverty reduction policies which are informed by behavioural insights may, as a result, be more effective.

The Child Trust Fund in the UK: How might opening rates by parents be increased?

The UK has recently seen the introduction of the Child Trust Fund (CTF). All babies born from September 2002 receive either a £250 or £500 endowment from government, with children from low-income families qualifying for the higher endowment. Parents are crucial for this policy. They are supposed to open an account for their child and will make key decisions about saving and investment. However, important issues confront parents. Around a quarter of parents leave CTF accounts unopened. I examine how opening rates might be increased, drawing in particular on recent work in behavioral economics. I suggest that policy ought to focus on reforms combining behavioral economics with steps to improve financial capability.

“Petit Déjeuner Compris” – Is It Really Free? Evidence from French and Italian Hotels

AbstractDespite the old claim in economics that “there is no such thing as a free lunch,” some of the recent work in behavioral economics and in other fields of study implies the contrary. In this paper I study whether French and Italian hotels actually provide a “free” breakfast when, as is done by many hotels around the world, its provision is included in the room price. The data indicate, using both cross-sectional comparisons and hotel-specific changes in breakfast provision, that there is no such thing as a free breakfast. In France and Italy hotels that offer, respectively, “petit dejeuner compris” and “compresa la prima colazione” appear to raise their room prices by 10 to 15 percent.

Reconsidering the moral hazard-risk avoidance tradeoff

The received model for optimal demand-side cost sharing trades off moral hazard and risk avoidance. This model appears to lie behind recent increases in initial cost sharing, such as those embodied in Health Savings Accounts and Health Reimbursement Accounts. At the same time there is evidence that lower cost sharing for certain drugs can reduce future total health care costs and/or improve future health, and this may be true of other medical services as well. To the degree that individuals remain in the same common insurance pool, lower cost sharing that induces increases in certain services that reduce total costs, including future costs, represents a classic case for a subsidy and will minimize an employer's labor costs. Even if total costs increase, the value of a change in health could increase more. In that case such a subsidy is consistent with recent work in behavioral economics for those with self-control problems.