Showing posts with label behavioral economics. Show all posts
Showing posts with label behavioral economics. Show all posts

Friday, December 22, 2023

Decline and decay of nudges

 Here's the latest paper to suggest that small "nudges" can have much less of a lasting effect than was initially thought.

The Semblance of Success in Nudging Consumers to Pay Down Credit Card Debt  by Benedict Guttman-Kenney, Paul D. Adams, Stefan Hunt, David Laibson, Neil Stewart & Jesse Leary, NBER WORKING PAPER 31926 DOI 10.3386/w31926  December 2023

Abstract: We run a field experiment and a survey experiment to study an active choice nudge. Our nudge is designed to reduce the anchoring of credit card payments to the minimum payment. In our field experiment, the nudge reduces enrollment in Autopaying the minimum from 36.9% to 9.6%. However, the nudge does not reduce credit card debt after seven payment cycles. Nudged cardholders tend to choose Autopay amounts that are only slightly higher than the minimum payment. The nudge lowers Autopay enrollment resulting in increasing missed payments. Finally, the nudge reduces manual payments by cardholders enrolled in Autopay.

Sunday, September 10, 2023

Nudges, shoves, regulations and designs: debate in Behavioral and Brain Sciences

Do "nudges" provide low cost solutions to big economic problems? Are they crowding out more effective, but harder or more expensive approaches?

The latest volume of Behavioral and Brain Sciences, Volume 46 - 2023, (a journal optimized to achieve impact factor, which counts references to previously published articles) contains 34 responses to the (previously published) target article*

The i-frame and the s-frame: How focusing on individual-level solutions has led behavioral public policy astray

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Here are two of the responses that might be of most direct interest to regular readers of this blog:

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The issue includes two separate responses by the authors of Nudge:

And here's a reply to all the commentary by the authors of the target article:

*Earlier post:

Thursday, June 16, 2022

 

Thursday, June 16, 2022

Behavioral economics and market design are quite different -- Nick Chater and George Loewenstein reflect

 Experimental economics is one of the empirical foundations of what we now call behavioral economics.  Market design sometimes depends on experiments, and is sometimes behavioral.  And when behavioral economists talk about "choice architecture" there is a clear connection with market design, although market design focuses more directly on the 'rules of the game' than on the psychology of human behavior.  Despite the connections, the two fields always felt quite different.

Here's a new working paper by two eminent behavioral scientists, one trained as a psychologist and one as an economist, saying that behavioral economics is oriented to individual level behavior, which is quite different from system level design and behavior, and that it can be costly to mistake one for the other.

The i-Frame and the s-Frame: How Focusing on Individual-Level Solutions Has Led Behavioral Public Policy Astray  by Nick Chater and George Loewenstein

Abstract: An influential line of thinking in behavioral science, to which the two authors have long subscribed, is that many of society’s most pressing problems can be addressed cheaply and effectively at the level of the individual, without modifying the system in which individuals operate. Along with, we suspect, many colleagues in both academic and policy communities, we now believe this was a mistake. Results from such interventions have been disappointingly modest. But more importantly, they have guided many (though by no means all) behavioral scientists to frame policy problems in individual, not systemic, terms: to adopt what we call the “i-frame,” rather than the “s-frame.” The difference may be more consequential than those who have operated within the i-frame have understood, in deflecting attention and support away from s-frame policies. Indeed, highlighting the i-frame is a long-established objective of corporate opponents of concerted systemic action such as regulation and taxation. We illustrate our argument, in depth, with the examples of climate change, obesity, savings for retirement, and pollution from plastic waste, and more briefly for six other policy problems. We argue that behavioral and social scientists who focus on i-level change should consider the secondary effects that their research can have on s-level changes. In addition, more social and behavioral scientists should use their skills and insights to develop and implement value-creating system-level change.

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updated reference: Chater N, Loewenstein G. The i-frame and the s-frame: How focusing on individual-level solutions has led behavioral public policy astray. Behav Brain Sci. 2022 Sep 5:1-60. doi: 10.1017/S0140525X22002023. Epub ahead of print. PMID: 36059098.

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This is not the first time that G.L. has warned of this. Here's his 2010 NYT op-ed:

Economics Behaving Badly By GEORGE LOEWENSTEIN and PETER UBEL, July 14, 2010

"As policymakers use it to devise programs, it’s becoming clear that behavioral economics is being asked to solve problems it wasn’t meant to address. Indeed, it seems in some cases that behavioral economics is being used as a political expedient, allowing policymakers to avoid painful but more effective solutions rooted in traditional economics."

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Here's a recent Social Science Bites podcast  in which GL is interviewed by David Edmonds. It touches on some of Loewenstein's vast accomplishments (he pioneered many of the most important topics in behavioral economics before they were widely recognized as important...). It focuses on the "empathy gap" that we exhibit when we fail to appreciate how we'll behave when we're in a different affective state. He also answers questions about where his ideas come from, and eclectic research methods.

George Loewenstein on Hot and Cold Affect

Tuesday, December 28, 2021

SMBC on economists and money (and game theory)

 Here's Saturday Morning Breakfast Cereal on economists: https://www.smbc-comics.com/comic/econs

And it's a two-fer, economists are hot over at SMBC: https://www.smbc-comics.com/comic/holes



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Friday, May 22, 2020

What makes a market transaction morally repugnant? by Leuker, Samartzidis, and Hertwig

Here's a new working paper on repugnance, from the Max Planck Institute for Human Development in Berlin.

What makes a market transaction morally repugnant?
Christina Leuker, Lasare Samartzidis, & Ralph Hertwig
April 23, 2020

Abstract: For many people, it is morally impermissible to put kidneys, jury duty exemptions, or permits for having children on the free market. All of these are examples of repugnant transactions—market transactions that third parties want to prevent. In two studies (N = 1,554), using respondents’ judgements of 51 different market transactions across 21 characteristics, we show that repugnance can be characterized along five higher-order dimensions: moral outrage, need for regulation, incommensurability, exploitation, and unknown risk. Repugnance toward the 51 market transactions was highly consistent across two samples. Our results can help identify mismatches between public sentiments and current regulations (selling carbon emissions is currently legal but considered repugnant), anticipate responses to novel markets that have not been publicly scrutinized (often arising from technological advances, such as markets for “designer babies”), and help design less repugnant markets (e.g., by making the risks involved in a transaction known to sellers).


And, in conclusion:

"Our studies have shown that perceived repugnance is quantifiable, and that market transactions can be profiled based on their underlying psychometric properties. The extent to which certain market transactions are considered repugnant is fairly stable across different respondent samples. Perhaps the most important finding from this research is that people’s judgments of a transaction’s repugnance can reflect a range of legitimate and important concerns. These concerns can be measured and possibly harnessed to predict how the public will perceive new, rapidly emerging transactions"

Sunday, April 12, 2020

Behavioral Economics, Computation, and Game Theory, all in Budapest in July, or online...

Here's the (appropriately cautious) announcement:

Behavioral EC '20
2nd Workshop on Behavioral Economics and Computation

The 2nd Workshop on Behavioral EC will be held in conjunction with the 21st ACM Conference on Economics and Computation (ACM EC '20) and will be co-located with the 6th World Congress of the Game Theory Society (GAMES 2020), on July 17, 2020, in Budapest, Hungary. The goal of the workshop is to bring together researchers from diverse subareas of EC who are interested in the intersection of human economic behavior and computation, to share new results and to discuss future directions for behavioral research related to economics and computation. It will be a full-day workshop, and will feature invited speakers, contributed paper presentations and a panel discussion.

...
Submission deadline: May 18, 2020, 11:59pm PDT.
Notification: June 11, 2020
The workshop: July 17, 2020
COVID-19 Updates: We are aware of the severe restrictions across the globe due to the COVID-19 pandemic. The SIGecom board will update with the final plans for the EC 2020 conference on or by May 6. In the event the in-person conference does not happen, we will hold the workshop virtually.  

Sunday, March 22, 2020

School choice without the assumption of full-information equilibrium by Kapor, Neilson and Zimmerman

Forthcoming in the AER:

Heterogeneous Beliefs and School Choice Mechanisms By Adam J. Kapor and Christopher A. Neilson and Seth D. Zimmerman

Abstract: This paper studies how welfare outcomes in centralized school choice depend on the assignment mechanism when participants are not fully informed. Using a survey of school choice participants in a strategic setting, we show that beliefs about admissions chances differ from rational expectations values and predict choice behavior. To quantify the welfare costs of belief errors, we estimate a model of school choice that incorporates subjective beliefs. We evaluate the equilibrium effects of switching to a strategy-proof deferred acceptance algorithm, and of improving households’ belief accuracy. We find that a switch to truthful reporting in the DA mechanism offers welfare improvements over the baseline given the belief errors we observe in the data, but that an analyst who assumed families had accurate beliefs would have reached the opposite conclusion.
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see my earlier post:

Monday, January 28, 2019

Wednesday, May 8, 2019

David Kreps on Behavioral Economics (Nemmers Prize Lecture)

David Kreps won the 2018 NEMMERS PRIZE IN ECONOMICS , and
today, at Northwestern, he is giving his

NEMMERS PRIZE LECTURE

"SOME DIMENSIONS OF BEHAVIOR WITH WHICH ECONOMICS SHOULD CONTEND"


Behavioral economics is generally taken to mean economics in which the behavior of individual agents does not conform to the “standard model” of rational behavior.  However, under this banner, one finds a very large number of specific “nonstandard” models of behavior.  This very large number prompts a standard criticism of behavioral economics:  If any behavior is permissible, any conclusion can be reached.  
Using a small handful of examples, the lecture illustrates and fleshes out a test for the value of work in behavioral economics.  This test is based on three principles:
  1.  Is the behavior in the model systematic, at least in some important contexts?
  2. Does positing this behavior lead to economically significant phenomena?
  3. Either via intuition or, preferably, empirical evidence, does the behavior provide "better" explanations of those significant phenomena, where defining the adjective “better” is the crux of the matter.

Monday, January 28, 2019

School choice in New Haven: studied by Kapor, Neilson and Zimmerman and switching from immediate to deferred acceptance

The New Haven Independent reports on efforts to change school choice there:
Profs Tapped To Fix School-Choice Lottery

"Would knowing the exact odds make any difference in the parents’s choices? If they’d been warned about their slim chances, would they be more likely to swap in a backup? If they still went ahead with a big gamble, should the lottery administrators take that as a signal of how deeply they care about their picks?

"The school district has tapped three academics to study those very questions in an effort to make the lottery process more transparent, simple and equitable this year.

"At its Monday night meeting on Meadow Street, the Board of Education’s Finance & Operations Committee recommended approving a non-financial agreement with three assistant professors —  Princeton’s Adam Kapor and Christopher Neilson and University of Chicago’s Seth Zimmerman —  to recommend how the district could do a better job marketing and communicating about a revamped enrollment process.

"As part of the agreement, New Haven will change the algorithm that it uses to assign students in 2019-20. Modeled on applications in New York, Chicago and Boston, the new model will ideally reward students for listing the schools that they’d like to attend rather than for gaming the system."

The project started with a study of the system's current, immediate acceptance algorithm

"In the paper, which was published in the American Economic Review in 2016, Kapor, Neilson and Zimmerman said that there’s currently more uninformed parents making mistakes than sophisticated gamblers making savvy bets. They concluded that “offering some means to learn about admissions probabilities for different portfolios” would likely be “welfare-improving.”

"Figuring out exactly what that will look like is the subject of Kapor, Neilson and Zimmerman’s next experiment.
As part of the memorandum of understanding that the Finance & Operations Committee reviewed on Monday, the academics agreed to provide a data analyst who will assist the Choice & Enrollment Office in-house at no charge for the next two years. With additional surveys and data analysis, they’ll review how the revamped lottery changes placement outcomes, family satisfaction and student achievement."
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For more on the investigators, see https://sites.google.com/site/adamkapor/research
http://wws.princeton.edu/sites/default/files/person/cvfiles/CNeilson_vita_extended_Princeton_2018_08_01.pdf
https://sites.google.com/site/sethdavidzimmerman/research

Monday, October 8, 2018

2018 Exeter Prize to Shengwu Li (and a very strong shortlist)

On a day when it's likely that another prize in Economics will be announced (but before it has been), I'm happy to note the following announcement on the ESA googlegroup:

We are happy to announce the winner of the 2018 Exeter Prize for the best paper published in the previous calendar year in a peer-reviewed journal in the fields of Experimental Economics, Behavioural Economics and Decision Theory.
The winner is Shengwu Li (Harvard University) for his paper “Obviously Strategy-Proof Mechanisms”, published in the American Economic Review.
The paper proposes and analyzes a desirable property for mechanisms implementing social outcomes. A mechanism is a game whose rules are designed by a social planner for the purpose of implementing a certain desirable social outcome (e.g., efficiency or fairness). Such mechanisms are always designed under the assumption that the parties involved will play an equilibrium outcome. Strategy Proof mechanisms received special attention in the literature, because they implement an outcome that is not only an equilibrium, but also one with dominant strategies, i.e., no player can do anything better than playing the strategy that leads to the socially desirable outcome, no matter what other people are doing. Yet as experimental and empirical results have shown, in real life, strategy proof mechanisms don’t always guarantee that players will do what they are expected to do. This is mainly because the reasoning behind the “right thing to do” is often complicated even in cases that admit a dominant-strategy equilibrium (one prominent mechanism of this sort is the second-price auction). Li’s paper proposes a concept of “obvious mechanisms.” This mechanism not only admits a dominant-strategy equilibrium, but also guarantees that it is cognitively simple to confirm that playing anything else is irrational. Li’s approach allows us to make mechanism design theory more applicable, and closer to reality. It warns us against choosing social mechanisms that we as game theorists hold to be secure, but when applied in the real-world will prove to be too complicated for people to do the right thing.
The winning paper was selected by the panel of Rosemarie Nagel (Pompeu Fabra University), Michel Regenwetter (University of Illinois) and Eyal Winter (Hebrew University of Jerusalem)
Shengwu will be visiting the University of Exeter to receive the award and give a public lecture.
This year was again exceptionally competitive with a large number of excellent nominations. In addition to the winner, this year’s shortlist was:
Chew, Soo Hong, Bin Miao, and Songfa Zhong. "Partial ambiguity." Econometrica 85.4 (2017): 1239-1260.
Glover, Dylan, Amanda Pallais, and William Pariente. "Discrimination as a self-fulfilling prophecy: Evidence from French grocery stores." The Quarterly Journal of Economics 132.3 (2017): 1219-1260.

Kessler, Judd B. "Announcements of support and public good provision." American Economic Review 107.12 (2017): 3760-87.

Thursday, August 9, 2018

Welfare in a behavioral world

This is a behavioral economics intensive week at Stanford, with the experimental SITE session just ended, and the Psychology and Economics session underway.

There are a lot of hard problems in behavioral economics: in some senses, it's harder to figure out what people may do if we aren't perfectly rational. But a particular problem is how we should take care of each other, if it isn't always clear how to evaluate someone's welfare.

For example, we had two talks in the earlier SITE session on paternalism--under what circumstances can we make people better off by giving someone else the power to make choices for them?  More generally, if people aren't always good at making choices, how can we tell what's good for them, i.e. how can we evaluate welfare?

Doug Bernheim and Dmitry Taubinsky tackle this question in a chapter in the forthcoming

Handbook  of  Behavioral  Economics,  Volume  1, edited by B.  Douglas  Bernheim,  Stefano  DellaVigna,  and  David  Laibson.

You can find it here as an NBER working paper:

Behavioral Public Economics
B. Douglas Bernheim, Dmitry Taubinsky
NBER Working Paper No. 24828
Issued in July 2018


"This chapter surveys work in behavioral public economics, emphasizing the normative implications of non-standard decision making for the design of welfare-improving and/or optimal policies. We highlight combinations of theoretical and empirical approaches that together can produce robust qualitative and quantitative prescriptions for optimal policy under a range of assumptions concerning consumer behavior. The chapter proceeds in four parts. First, we discuss the foundations and methods of behavioral welfare economics, focusing on choice-oriented approaches and the measurement of self-reported well-being. Second, we examine commodity taxes and related policies: we summarize research on optimal corrective taxes, the efficiency costs of sales taxes that are not fully salient, the distributional effects of sin taxes, the use of non-price policies such as nudges, the tax treatment of giving, and luxury taxes. Third, we examine policies affecting saving, including capital income taxation, commitment opportunities, default contribution provisions for pension plans, financial education, and mandatory saving programs. Fourth, we detail the manner in which under-provision of labor supply and misunderstandings of policy instruments impact optimal labor income taxation and social insurance. We close with some recommendations for future work in behavioral public economics."


Saturday, July 7, 2018

Tsinghua Conference on Behavioral, Experimental and Theoretical Economics (BEAT), July 9-10

Tsinghua Conference on Behavioral, Experimental and Theoretical Economics
(Tsinghua BEAT 2018)

July 9-10, 2018


Keynote speakers:
Jacob Goeree, University of New South Wales
Ed Hopkins, University of Edinburgh
Alvin Roth, Stanford University (2012 Nobel Laureate in Economics)

We are pleased to announce the 2018 Tsinghua Conference on Behavioral, Experimental and Theoretical Economics (shortened as Tsinghua BEAT). The conference will be held on the campus of Tsinghua University, at the School of Economics and Management, in Beijing on July 9-10, 2018

Program Overview:
Detailed paper schedule: Tsinghua BEAT 2018 (PDF)
Conference websitehttp://tinyurl.com/tsinghuabeat

Monday July 9th

Session Chair:  Tracy Xiao Liu
09:00 – 10:00    The Favored but Flawed Simultaneous Multiple Round Auction, Jacob Goeree*(joint with Nick Bedard, Philippos Louis, and Jingjing Zhang)

Information and Communication
10:15 – 10:45   Costly Miscalibration in Communication, Yingni Guo* (Northwestern) and Eran Shmaya
10:45 – 11:15   Robust Persuasion of a Privately Informed Receiver, Ju Hu and Xi Weng*
11:15 – 11:45   Ambiguous Persuasion, Dorian Beauchêne, Jian Li* (McGill) and Ming Li

Market Design
13:00 – 13:30   Core of Convex Matching Games, Xingye Wu* (Columbia/Tsinghua)
13:30 – 14:00   A Dynamic College Admission Mechanism in Inner Mongolia: Theory and Experiment, Binglin Gong and Yingzhi Liang* (Michigan)
14:00 – 14:30 Obvious Mistakes in a Strategically Simple College Admissions 
Environment: Causes and Consequences, Ran I. Shorrer and Sándor Sóvágó* (Groningen)

Search and Information Preference
14:45 – 15:15  Sequential Search with a Freeze Option - Theory and Experimental Evidence, Emanuel Marcu and Charles N. Noussair* (Arizona)
15:15 – 15:45  Information Avoidance and Medical Screening: A Field Experiment in China, Yufeng Li, Juanjuan Meng, Changcheng Song* (NUS) and Kai Zheng

Chen Daisun Lecture, Main Auditorium, Weilun Buiding, chaired by Yingyi Qian, Dean of School of Economics and Management, Tsinghua University
16:15 – 17:30  Repugnant Transactions and Forbidden Markets, Alvin Roth, Stanford University, 2012 Nobel Laureate in Economics


Tuesday July 10th

Session Chair:  Alexander White
09:00 – 10:00   Price Dispersion and Cycles: Theory and Experiment, Ed Hopkins* (joint with Tim Cason and Dan Friedman)

Development
10:15 – 10:45   Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design In The Field, N. Rigol, R. Hussam and Benjamin Roth* (Harvard)
10:45 – 11:15   Prosocial Compliance in P2P Lending: A Natural Field Experiment, Ninghua Du, Lingfang Li* (Fudan), Tian Lu and Xianghua Lu
11:15 – 11:45   Does Haze Cloud Decision Making? A Natural Laboratory Experiment, Soo Hong Chew, Wei Huang and Xun Li* (Wuhan)

Reputation and Risk
13:00 – 13:30   Reputation Effects under Interdependent Values, Harry Di Pei* (MIT/Northwestern)
13:30 – 14:00   The Persistent Power of Promises, Florian Ederer* (Yale) and Frédéric Schneiderz
14:00 – 14:30   Intertemporal Consumption with Risk: A Revealed Preference Analysis, Joshua Lanier, Bin Miao* (SUFE), John Quah and Songfa Zhong

Cognitive Biases
14:45 – 15:15   Motivated Framing Effects, Christine L. Exley and Judd B. Kessler* (Penn)
15:15 – 15:45   Are People Aware of Their Inattention: Evidence from Credit Card Repayment, Jiajun Jiang, Yi-Tsung Lee, Yu-Jane Liu and Juanjuan Meng* (Peking)
15:45 – 16:15   Competing by Default: A New Way to Break the Glass Ceiling, Nisvan Erkal, Lata Gangadharan and Erte Xiao* (Monash)

Organizing Committee:
Xiaohan Zhong