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Paula Atienza

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Friends of the Behavioral Economics Club, this week we present the paper “Exploring the use of nudges to improve HIV and Other Sexually Transmitted Infection Testing Among Men Who Have Sex With Men”, by Aung, E. T.; Fairley, C. K.; Chow, E. P. F.; Maddaford, K.; Wigan, R.; Read, D.; Taj, U.; Vlaev, I. and Ong, J. J. (2022), in which the authors ask the question of whether nudges, which belong to behavioral economics theory, could be useful when it comes to improving prevention of ITS. 

Several health organizations recommend that people who are sexually active and, above all, have multiple sexual partners be screened for HIV and other sexually transmitted diseases

Regular screening for STDs plays an integral role in the control of pandemics of this type, because early detection of infections helps to reduce morbidity and onward transmission, as well as the negative effects of the disease for the person who contracts it. 

As a study population for the current paper, the authors chose gay and bisexual men (and, in general, men who have sex with men). 

The Australian Periodic Gay Survey reported an increase in HIV testing between 2016 and 2020, however, there was a decline in the number of tests in 2021.

The authors believe that the most effective way to increase early detection of HIV and other STD infections is to use behavioral economics strategies effectively. Why?

Well, because the decision to obtain an HIV test is identifiable with economic theories, as it involves making decisions taking into account benefits (early treatment of STDs) and costs (the time it takes to get tested, difficulties in accessing clinical services, test anxiety…). 

Thus, the authors put forward the idea of “nudges,” which, basically, is a discipline that is designed to influence behavior in a predictable way, increasing the benefit to the individual and the community at large

Nudges are attractive policy options because they can be very effective, maintain the individual autonomy of those being nudged, and can often be achieved at low cost. 

A very famous and effective form of nudging, if done correctly, is message development. These can be framed so that the same decision or choice can be presented using positive, negative, and/or other framing. Due to the principle of loss aversion, this can change the attractiveness of each of the options presented within the message. This, applied to STD transmission, is something that few studies have explored

This study was conducted with the help of the Melbourne Sexual Health Center, which is a mental health clinic in Victoria, Australia. This clinic uses a computer-assisted self-interview system that all clients register upon arrival at the clinic. They are also briefly asked about their sexual history in that self-interview.

In addition, they are asked if they would like to receive a reminder every three months advising them to be screened as a routine process, specifically, if they would like to receive the reminder by SMS. Between 80% and 90% of the men chose to receive a reminder. 

This entire process was repeated with 309 clinic users over 18 years old who agreed to participate and receive reminders.

These reminders could be formulated in different ways. First, in a neutral way (“your next checkup is due, call to schedule an appointment”), in a personalized way (“hello, ‘name’, your next checkup is due, please make an appointment”), following social norm (“your next checkup is due, most people get tested when they receive this message, please make an appointment”), positively (“you should have your next checkup, to stay healthy regular testing is recommended, please make an appointment”) or negatively (“you should have your next checkup, not testing regularly could harm your health, call for an appointment”). 

Participants had to choose which of all the forms they preferred for their reminder message. 

The study showed that they preferred neutral, personalized, positive messages over negative or social norm messages. The majority of participants also preferred the SMS message over an email. 

Most men in the study already received SMS reminders from before and in a neutral way, so it was not surprising that the most popular message was such a message. This may be because of the exposure effect, i.e., people like things they are familiar with. However, younger men preferred the positive message, so it would be appropriate to use it for people in the newer generations. 

The key to the nudges is to make it easy for people, which is ultimately what we should focus on. 

Authors recommend taking the results with caution, as the experiment was conducted in Australia, and may not be a globally representative population. 

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Friends of the Behavioral Economics Blog, this week we present the paper “Monetary incentives do not reduce the repetition-induced truth effect” by Speckmann, F. and Unkelbach, C. (2022) in which the authors carry out an experiment to know whether the introduction of financial incentives affects when it comes to distinguish between a lie and a truth, specifically, considering the repetition-induced truth effect. 

People see, read and hear many different events and statements every day (news, social networks, conversations…) that they may doubt or believe.

Apparently, people use repetition as a signal to lean one way or the other when it comes to making a decision about the veracity of what they hear. Therefore, they tend to believe statements that are repeated more, compared to statements that are repeated less. 

This phenomenon is known as the illusory truth effect, truth by repetition, or simply the truth effect.

In a paper by Hasher in the 1970s, participants were presented with a total of 60 statements. Half of them were false and half were true. The participants were exposed to them in two sessions. During each of these, 20 of the 60 statements were repeated, and the remaining 40 were newly introduced. That is, 20 of the 60 statements were shown in the two sessions. After the presentation phase in each session, participants were asked to rate the validity of each statement. The participants judged the repeated statements as more valid and credible than the new statements, which demonstrated the basic truth effect. 

The effect has gained more prominence in recent years, as it may serve as an explanation for people’s belief in conspiracy theories, misinformation and fake news, due to the frequent repetition of false information on the internet and social networks. 

In this study, the authors investigate what happens if, when a decision has to be made, economic incentives must be taken into account. That is, what happens when, when choosing between qualifying a statement as true or false, a certain amount of money is gained or lost, depending on whether one gets it right or wrong. 

In other words, they asked whether the repetition-induced truth effect persists if participants’ decisions are highly financially incentivized. 

The fact that incentives diminish the truth effect would suggest that the real-life impact of repeating information is not as critical as it seems. 

However, if monetary incentives do not reduce the truth effect of repetition, it would underline the relevance of the phenomenon in real life. At the theoretical level, it would show that people potentially consider repetition as a valid cue for making their decisions. 

In the experiment, the authors used 120 statements, 60 of which were true and 60 false. They recruited a total of 321 people. They divided them into three groups: the high-incentive group (they could earn up to 12€), the medium-incentive group (they could earn up to 6€), and a final group with no incentives. However, all three groups were told that they could earn a maximum of €4. 

For each statement, they had to indicate whether they considered it true or false. They did not know this, but for each correct answer they would receive €0.10 and for each false answer they would lose €0.10, and could never get negative results. 

Although some participants could receive up to €12 and others up to €6, it seems that the incentives did not substantially influence the repetition-induced truth effect. 

Using an exploratory contrast, the authors found a slight difference in the truth effect between the “no incentive” conditions and the “with incentive” conditions: participants showed a slight reduction in their tendency to judge repeated information as true, but the effect was very small in size, so it is not considered strong evidence. 

Significant differences occurred, however, when it came to response time. Being shorter, it seems logical to think that participants were motivated to answer correctly as often as possible to increase their gains. 

The results are consistent with others obtained in previous literature, and illustrate the robustness of the repetition-induced truth effect by showing that, even when adding direct consequences to truth judgments, there is no change in people. 

Thus, the data support existing cognitive explanations of the repetition-induced truth effect, with potential implications for real-world phenomena that have been explained for some time now, such as belief in fake news, conspiracy theories, among others. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

We are proud to announce that FeedSpot has ranked us in the top 10 best Behavioral Economics blogs on the internet. We are ranked as number 5, thanks to the collaboration of all our readers. From here, we want to thank both FeedSpot and you. We keep it up!

Friends of the Behavioral Economics Blog, this week we present the paper “Why do people stay put in environmentally stressful regions? Cognitive bias and heuristics in migration decision-making”, by Czaika, M. and Reinprecht, C. (2022), in which authors talk about the cognitive biases and heuristics that may underlie migration-related decision making by people living in stressful environments.

Human migration and mobility are massive phenomena. Currently, more than 270 million people live outside their country of birth, more than 700 million have moved between regions within the same country, and 1.2 billion people cross borders for short trips each year.

Until they make the decision to move, these people are part of a latent population of potential migrants. 

In addition, about 500 million people think that they may have to move, due to environmental problems, in the next 5 years. 

Most people exposed to slow or rapidly deteriorating environmental conditions do not migrate despite the availability of exit options. This is because there are drivers of immobility that limit migration and motivate people to wait and stay. 

There are economic, political, social, cultural, demographic, ecological and environmental factors that affect decision making of this type. 

The fundamental ones are usually economic, such as unemployment, wage disparities, or lack of economic opportunities. 

In addition to economic factors, socio-political factors such as wars and civil strife, instability, insecurity, military recruitment, human rights abuses, lack of democratic rights… are key structural drivers of migration. 

On the other hand, social ties with family and community are a very important retention factor. In a 2020 survey of citizens of Ethiopia, India, Peru and Vietnam, it was found that the majority of people who wanted to migrate did not do so because they did not want to leave their family living there. 

The role of climate change is gaining momentum in migratory aspects and is worth mentioning, because it implies that both mobility and immobility may be the behavioral outcome of slow or rapid onset environmental stressors. However, economic factors remain the most relevant. 

We may wonder why many more people do not migrate to take advantage of opportunities elsewhere, or why more people living in an environmentally stressful situation do not decide to escape. 

The combination and interaction of economic, political, social, cultural and demographic factors shape the effect of environmental stressors on migration. They often act simultaneously, which makes it more difficult to analyze the reasons for not migrating. 

What experts mention is that, in general, migration decision-making can be considered a two-step process: first, people decide whether they want to migrate, then where they want to relocate. 

The first step consists of developing the intention, rather than simply a vague desire; the second step involves considering migration or behavioral options and deciding whether to migrate or stay. 

To migrate, individuals need economic, social, emotional and cognitive resources. If they aspire to a better life but cannot execute migration, people may feel trapped, frustrated, and experience cognitive dissonance. 

Behavioral sciences propose three main cognitive biases: first, the status quo bias, that is, people have a strong preference for the context and situation in which they currently live, which can be reinforced by the endowment effect, which would be the second bias. According to this, people value what they have more than what they could have, even if both are of equal value. And finally, regret avoidance, i.e., people prefer to avoid anticipated negative outcomes resulting from action rather than inaction. 

Authors recommend that people with migration aspirations decide on their long-term relocation after exploratory visits that reduce uncertainty about the new place of residence. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

Friends of the Behavioral Economics Blog, this week we present the paper “Healthy Nutrition and Behavioral Economics: From Principle to Practice”, by Yasenok, V. O.; Smiianov, Y. V.; Pidmurniak, O. O.; Kravchuk, L. S. and Hornostaieva, P. O. (2022), in which authors talk about a few studies carried out by them where it is observed how different theories of behavioral economics can be applied effectively when it comes about achieving a healthy nutrition. 

Healthy nutrition provides proper growth and development to all living beings, contributing to the strengthening of health and disease prevention.

According to WHO, it is necessary to increase the amount of fruits, vegetables, fish, whole grains and nuts in the diet. It is also necessary to limit the consumption of processed meats, red meat, sugary drinks and, in general, products with a lot of added sugar, salt or alcohol. 

Poor nutritional quality can deteriorate health and make us develop certain pathologies. 

What we fail to understand is how, when information on good nutrition is available, the incidence of associated diseases continues to increase. 

Traditional economic analysis cannot explain why many people choose risky behaviors that can harm their health. For this reason, more and more scientists around the world are focusing on behavioral economics, which tries to explain why people behave irrationally. 

In the book “Nudge” by Thaler and Sunstein, the idea appears that understanding how people make decisions can be used to encourage them to make the right decisions, without limiting freedom of choice.

Authors discuss, in an attempt to provide new insights, some interesting data they obtained from a study conducted with students at Sumy University. 

First, it is important to understand that environmental factors such as the social environment, the presence and level of distractions, and even lighting, can affect people’s food choices. Therefore, some of these factors can consequently be used to “nudge” people toward rational choices. 

For example, low-nutrient fatty products are currently widely available, inexpensive, and sold in large quantities. This makes people opt more often for them, even if they are trying to maintain a good diet. It is also important to consider the fact that people tend to be overly optimistic about their health in the future, constantly postponing the abandonment of negative eating habits, leaving them “for tomorrow”. 

Most decisions about nutrition are made primarily by the automatic system. The processing of information about the caloric content of food, based on a large amount of numerical data, requires certain efforts on the part of the person to understand them.

Authors propose a color labeling system that they call the “traffic light method”, with a small green label for the healthiest foods, a yellow or orange label for those of medium level and a red label for foods that are higher in calories and, in general, less healthy. This makes it much easier for people to know which are the healthiest choices. 

There is also the “half plate method” that some people find very visual. It consists of imagining a plate and filling half of it with “green foods”, such as fruits and vegetables, and always taking it as a reference for meals. 

In an experiment conducted by the same authors in 2020, it was shown that placing healthy foods at eye level in a high school cafeteria, together with the color-coded labeling method, contributed to an increase in their consumption. 

Behavioral interventions in the food environment should be at the heart of health policy to help improve people’s nutritional behavior and play a major role in disease prevention. 

In addition, behavioral science, and in particular behavioral economics, is again shown to be very useful in shedding light on important factors that contribute to the emergence of major public health problems. 

​​If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

Friends of the Behavioral Economics Blog, this week we present the paper “Addressing Consumerism and the Planetary Health Crisis: Behavioral Economics Approach in Public Policy” by Sarkar, A. (2022), in which the author speaks about the different environmental problems that have been emerging in the last few years and are related to consumption, plus, he points out the utility of behavioral economics to improve the reduction of the negative impacts they have. 

Climate change, environmental pollution and the loss of biodiversity are the great enemies of humanity and, currently, its greatest threat.

They are called “The Planetary Crisis Triad”, and they cause serious problems in numerous areas of life. For example: the increase in extreme weather events, the spread of vector-borne infectious diseases due to the expansion of invasive arthropods into regions that were previously cold climates, hormonal diseases due to exposure to pollutants, even mental illnesses, among others many consequences.

That is why, for some years, the guidelines dictated by a series of international protocols and agreements have been followed, which have achieved some progress. For example, a decline in the production of hazardous chemical materials such as persistent organic pollutants, the rapid growth of renewable energy, and a commitment to stop promoting coal-fired power plants.

Even so, no international treaty has focused on stopping the unnecessary mass consumption at the individual level. Consumption is the main pull factor for high energy demands and depletion of the Earth’s finite resources, and industries are constantly increasing their output to meet customer demand.

In this sense, the rich countries and emerging economies cannot deny their part of responsibility in controlling current levels of consumption.

In recent years, the promotion of electric vehicles has been very important in stopping greenhouse gases, and its effects are expected to be even greater in the coming years.

However, it is worth noting that growing energy demands cannot be met by renewables alone. Renewable energy sources provide clean energy, but they also produce toxic waste. The evidence therefore makes it clear that success in tackling the planetary health crisis depends on tackling our consumption.

This is where the concept of circular economy appears. It is a novel discipline that aims to operate in the use of resources within closed-loop systems, reduce pollution and prevent resource leakage while maintaining economic growth. The system is called “circular” because it aims to reduce, reuse, recycle and recover.

However, circular economy has been criticized for having a limited conceptual basis and lack of consistency in terms of how it can contribute to sustainable development, for example if recycling itself is energy intensive.

In today’s society, a pervasive sense of dissatisfaction drives humans to desire material things and their subsequent rapid disposal, resulting in the purchase of newer products (here terms such as “planned obsolescence” become relevant). For example, we now buy 4-5 times more clothes than we did 30 years ago, leaving a staggering environmental impact. Globally, the fashion industry produces almost 90 million tons of waste per year, and consumes at least 80 billion liters of water.

Drawing on psychology and economics, behavioral economics has repeatedly proven its usefulness for many purposes, and the author believes that it could provide effective answers to the problem of the environment.

For example, humans are known to move in a fast, immediate world, so simple messages about stopping buying so much and using biodegradable products, switching to “eco-friendly” alternatives, might be more helpful.

Taxes and allowances can work well at times; however, simple economic incentives are not useful for everything; for example, charging for plastic bags in stores does not prevent customers from taking them away.

The author also mentions nudges, which are based on the fact that humans sometimes need nudges to act rationally. Well thought out, they can be effective. For example, placing information on restaurant menus about plates made with local or vegetarian products, to encourage their consumption.

The conclusion is that a paradigm shift is necessary to motivate and lead people towards a pro-environmental path, through effective social learning, advertising and communication campaigns, etc. For this, it seems that behavioral economics and the architecture of choice are very useful tools whose application should be explored.

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Friends of the Behavioral Economics Blog, this week we present the paper “Why do people avoid and postpone the use of voice assistants for transactional purposes? A perspective from decision avoidance theory”, by Malodia, S.; Kaur, P.; Ractham, P.; Sakashita, M. and Dhir, A. (2022), in which authors carry out a study to know how evitation and procrastination work related to the use of intelligent virtual assistants. 

Consumers have shown notable interest in adopting voice assistants equipped with artificial intelligence, known as “smart speakers.” An example is Alexa (from Amazon), Siri (from Apple) or OK Google.

The creation of these assistants is expected to redefine the ways consumers interact with businesses and engage in various purchasing activities.

In Japan, in 2018, 3.7 million homes owned voice assistants, and that number is expected to grow 500% by 2024, reaching 22 million.

While the adoption of voice assistants is impressive, most consumers have several fears, concerns, and misconceptions about using them in their daily lives. The most common fears and prejudices are related to security, privacy and various financial risks.

As a result, the actual use of voice assistants remains limited to non-transactional activities, such as searching for information, listening to music, and checking news and weather updates.

In Japan, a recent report suggests that only 17.5% of those who own voice assistants use them for transactional purposes. In addition, more than 60% expressly avoid this type of behavior. But what are the reasons?

In previous literature on consumer behavior, avoidance of any product or service is called “consumer inertia,” while postponement is called “procrastination”. Academics suggest that understanding the underlying factors of avoidance and postponement is just as important as understanding the factors that influence service or product adoption.

Because inertia and postponement can result in missed opportunities for marketing experts, it’s a topic that demands in-depth research. It is important to know the background and consequences of evasion and postponement.

Previous literature on avoidance suggests that cognitive biases and nudges are two important antecedents that reinforce or mitigate the influence of consumer decision avoidance.

It is not known, however, whether nudging techniques are effective in mitigating the negative influence of consumer decision avoidance in the context of transactional use of voice assistants and, if so, how the process works. The question also arises as to whether the push can be counterproductive if it is not implemented correctly.

In 2003, decision avoidance was defined as “a tendency to avoid making a choice, postponing it or looking for an easy way out that does not involve any action or change”. When facing difficult decisions, consumers often go into decision avoidance mode to escape feeling uncomfortable. Decision avoidance theory is based on three psychological measures: inertia or status quo bias, action or omission bias, and delay or deferral of choice. This point is further explained in the original article.

Authors identified context-specific dimensions of inertia and procrastination through a qualitative study involving 29 in-depth interviews. Senior executives (5) who worked with popular voice assistant brands were interviewed, as well as consumers (24) who used these assistants in the last six months.

Consumers were found to be using them through their phones and also through smart speakers, with Amazon being the most popular company.

Consumer interview questions were designed to understand their experiences with and apprehensions about voice assistants.

Authors found that there is a negative association between procrastination of decisions and rejection behavior, which is a significant contribution to the literature on procrastination, as well as literature on rejection behaviors.

Although authors had hypothesized that nudges might help reduce procrastination, the results revealed a significant positive association between both. In addition, support was found for the idea that cognitive biases significantly discourage the use of voice assistants for transactional purposes, as well as for the idea that nudges could significantly improve the intentions to use voice assistants for transactional purposes.

​​If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

Friends of the Behavioral Economics Blog, this week we present the paper “Economic burden of attention-deficit/hyperactivity disorder among children and adolescents in the United States: a societal perspective”, by Schein, J.; Adler, L. A.; Childress, A.; Cloutier, M.; Gagnon-Sanschagrin, P.; Davidson, M.; Kinkead, F.; Guerin, A. and Lefebvre, P. (2022), in which authors carry out an investigation to know, from a societal perspective, what is the cost derived from living with an attention-deficit/hyperactivity disorder. 

Attention deficit/hyperactivity disorder (ADHD, hereinafter) is one of the most common neurobehavioral disorders in childhood, characterized by levels of inattention, impulsiveness, and hyperactivity that are not appropriate or beneficial to the child’s stage of development.

ADHD is most often diagnosed in children, however, it can occur at any stage of life.

The percentage of people with ADHD in the United States is between 10 and 6.5% for children and 4.4% for adults.

People living with this disorder may have functional and psychosocial deficiencies in the academic and/or work environment.

Furthermore, the burden borne by children and adolescents extends to their parents and caregivers as well. For example, parents of children with ADHD must spend their money on doctors, special education, or extra care services for their children, as well as other indirect losses related to absences from work, if they are necessary to care for their children.

In addition, the difficulties children with ADHD face are likely to continue into adolescence if their symptoms are not properly identified or managed early on.

Teens with ADHD generally face greater academic, work, and social demands, and may also be more vulnerable to substance use or traffic accidents.

In addition, it is known that ADHD can become a chronic problem for patients, with a percentage that varies between 35-78% of children and adolescents who maintain symptoms in adulthood. Therefore, adolescents with ADHD are at risk of experiencing adverse conditions associated with the disorder during their transition to adulthood.

Since the manifestation of ADHD often has direct implications for how patients interact with society, it is imperative to consider the full societal costs associated with this condition in order to understand the true economic burden from a societal perspective.

However, despite the extensive body of research conducted on children and adolescents with ADHD, previous studies that have attempted to quantify the economic impact have mostly been from a payer perspective, assessing only direct health care costs, or have focused on one or just a few components of ADHD.

In this article, the goal was to provide a comprehensive assessment of the economic burden of children with ADHD on the one hand and adolescents with ADHD on the other. The main cost components that contribute to the associated social economic burden were sought, which can help promote new clinical and social policies to mitigate the impact of the disorder on patients, their relatives and, in general, society.

The applied approach was based on prevalence, mainly with a “bottom-up” method, to estimate the excess costs incurred by a person with ADHD compared to a person with neurotypical development.

The obtained data comes from different places. For example, direct health care costs come from health insurance, while the prevalence of ADHD in children and adolescents was obtained from the 2018 US National Survey of Children’s Health.

The results obtained indicated that the total social costs associated with ADHD in the United States in 2018 were 19.4 million dollars for children and 13.8 million for adolescents. These results are further developed by area in the article.

The findings show that the economic burden of living with ADHD is important, so it is necessary to seek solutions. 

Education costs accounted for approximately half of the total figure, standing at around 11.6 million for children and 6.7 million for adolescents. This may be because there are costs that may be related to tutoring, the use of specialized teachers, as well as expenses associated with material items (books, technological support, etc.).

Authors conclude that the development of improved intervention strategies and ADHD awareness policies are needed to overcome diagnostic barriers, improve treatment adherence, alleviate educational and medical difficulties, and minimize stigma. .

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

Friends of the Behavioral Economics Club, this week we present the paper “Wealth, Financial Literacy and Behavioral Biases in Japan: the effects of various types of financial literacy”, by Sekita, S.; Kakkar, V. and Ogaki, M. (2022), in which authors analyze the results of a big survey carried out in Japan in 2016 to know what is the level of financial education of the Japanese population, and deeply study what this level of knowledge implies. 

There is a growing body of literature documenting that levels of financial education measured around the world are alarmingly low, even in economically advanced countries.

With life expectancy increasing around the world, the responsibility for accumulating retirement savings shifts from employers to employees. Along with the increasing sophistication and complexity of financial products and services, these low levels of finance lead to significantly lower levels of well-being, obtained through poor economic decisions.

The evidence from surveys conducted on the subject shows that many adults do not have a retirement plan, and that savings are insufficient for retirement, so that the usefulness of families’ economic capital is not maximized and optimally enjoy the cycle of life.

This article explores the impact of financial education on a key economic variable with important consequences for general well-being: accumulated wealth per home.

Using data from Japan’s first large-scale survey of the financial literacy of its population, the article contributes to the emerging literature on the relationship between financial education and wealth accumulation.

For a little less than thirty years, the importance of financial knowledge has been highlighted to explain the importance of saving behavior. In addition, a large amount of research has been carried out on the measurement of financial education and its effects on different household behaviors.

Some of these studies find that financial education is related to a greater tendency to planning the retirement, less anxiety about life in retirement, a greater tendency to save for emergencies, greater possession of cash, less tendency to access indebtedness, less tendency to gamble, and even less tendency to smoke.

On the other hand, in 2021 it was discovered that people with high levels of financial education tend to make speculative investments, take on excessive debt and have somewhat resourceful financial attitudes.

So, is there really a difference between having financial knowledge or not? Authors believe that there is, but even if people are financially educated, they should be careful not to engage in bold and reckless behavior,  and mustn’t think that being financially educated is inherent in being always less vulnerable.

To review all of this data and to find out if this is indeed the case, authors used the 2016 Financial Literacy Survey that was conducted in Japan by the Japanese Central Financial Services Information Council.

It was the first large-scale survey conducted in Japan with the aim of assessing the financial knowledge and decision-making skills of Japanese adults. About 25,000 people between the ages of 18 and 79 participated.

The findings confirm that improvements in financial education can have large benefits for Japanese households and increase their financial asset balances.

It’s important to mention that it is useful to distinguish between different types of financial education, as they have different impacts. For example, knowledge of deposits, risk and debt has a greater impact when it comes to insurance.

The need to include financial education in the study plan of schools is pointed out and, not only that, but also to ensure that classes are taught effectively.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

Friends of the Behavioral Economics Club, this week we present the paper “Behavioral Economics: its influence on the prediction of sports results” by Pérez-Martínez, A. and Rodríguez-Fernández, A. (2022), in which authors carry out a study to identify which biases appear when it comes to predict sports bets’ results, specifically, of soccer matches. 

There are some economic theories that establish that humans have the ability to correctly analyze the probabilities and benefits of each alternative when making decisions of any nature. Therefore, it is assumed that we will opt for the option that generates the best results for us. However, the rational character of the human being has always been overestimated in economics throughout its history.

Behavioral economics is an evidence-based discipline that focuses on the conditions and characteristics of economics that are uniquely human.

Behavioral economics understands that the vulnerability of the human mind is related to multiple contemporary social problems. The uncertainty under which decisions are made generates a significant risk that influences the processing of information. The main contribution of behavioral economics is the discovery of a series of determinants that influence the final decision made by the human being.

These determinants are heuristics and cognitive biases. It is important to recognize that all human beings sometimes act influenced by cognitive biases, and these are therefore predictable to some extent. Information processing capacity is limited, as well as concentration and attention. For this reason, errors are not random, but the result of heuristics or cognitive biases, mental shortcuts, which is the primary function of these mechanisms.

One area where insights from behavioral economics have been applied is sports bets. The prediction of the results of the bets is considered a rational process, which depends on the experiences, experiences, and the information that the person has at the moment of generating this prediction.

However, reality points to the diversity of alternatives, questioning the supposed rationality.

The objective of the research is to analyze the presence of cognitive biases that affect the prediction of sports bets’ results. In other words, it aims to demonstrate the influence of these biases.

The scientific ideas that authors propose to contrast are based on behavioral economics theory and are as follows: first, people tend to vary their preferences when the information they know about the sporting situation increases; on the other hand, intuitive thinking, optimism biases, the representativeness heuristic, overinference, the hot hand and small numbers, will be biases that will appear in people’s decision making in this context.

To find out whether these hypotheses are true, an experiment was carried out with students from universities in Latin America. In total, 66 young people participated.

They were asked a series of assumptions, all related to soccer, and with predictions about the results of different matches. The basic idea of ​​all of them was to predict which of the two teams would finish first in the league knowing the results of the previous matches and making a series of quick calculations on the points achieved.

The experiment shows that it is not possible to predict people’s decisions with a high degree of reliability, due to the existence of multiple criteria that subjects use to determine their prediction.

However, the presence of some biases was observed, which corroborates the theory of behavioral economics.

For example, the overinference bias appeared. That is, an assumption about the impossibility of manifesting a result that has not appeared, or maintaining one that has been obtained. This bias would appear when it is considered that the team that has won most of the time, will be the team with the most chances of winning in the future; just like winning will be more likely than drawing.

The bias of excessive optimism also appears, which would be the strategy of positively distorting the expectations of the future. Among the reasons for the presence of this bias is that it occurs because people do not review their preliminary assessments sufficiently after obtaining new information, and do not realize to what extent their estimates are wrong.

Emotional elements also influence, since one will have a more optimistic opinion of the team he/she is a fan of.

Other equally interesting biases appear that can be consulted in the original article.

It can be concluded that, indeed, sports predictions operate under the principles of limited rationality and behavioral economics analysis techniques can be successfully applied.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

Friends of the Behavioral Economics Club, this week we present the paper “Mobile Shopping Durin Covid-19: The Effect of Hedonic Experience on Brand Conspicuousness, Brand Identity and Associated Behavior” by Jiang, W. and Song, Y. (2022), in which authors carry out a study to know how the Generation Z people have been affected by the pandemic regarding their shopping habits, and how are these now. 

One of the measures adopted to reduce the transmission of Covid-19 was social distancing, which we still try to maintain today.

During the pandemic, the Internet has been particularly important, as people have increased their online activity for multiple reasons, resulting in, among other things, an extreme growth of online shopping. Only in China (this work’s context) 70% of consumers increased their online purchases during the pandemic.

The ease with which members of Generation Z make use of technologies is what has had the most impact on the e-commerce strategies of companies around the world. Brand efforts have increasingly focused on developing followers within this demographic group in the context of the Internet, for example, trying to identify the factors that make purchases to be made through mobiles or computers, and not face-to-face. 

One of the points that has caught the attention of the experts has been the identity of the brand and the identity of the consumers. In other words, consumers have a desire to express their personal identity through their brand choices. In terms of self-expression, it seems that the key factor is the perceived uniqueness of a brand.

Furthermore, because they have been born into the digital era, members of Generation Z have never known life without the internet or smartphones. It is often argued that, as a result, these individuals are more comfortable presenting a “public self” than members of previous generations. Proof of this would be the regular use of smartphones to model their identity and narrate their lives online, strengthening their sense of uniqueness.

All this is related to the so-called “hedonic experience”. This theory is based on the notions that consumption is driven by the pleasure consumers experience in using a product, and that the criteria for successful consumption are obviously aesthetic in nature. Much of the current literature on the hedonic experience suggests that the buying process itself is often a source of even greater pleasure than the actual purchase of products.

Furthermore, consumers pay a lot of attention to the design and appearance of products apart from their functional aspects.

On the other hand, we have already mentioned brand identity. Distinction and prestige tend to strengthen it, making certain brands more attractive than others.

Similarly, brands seen as especially distinctive tend to be seen as especially trustworthy, as consumers perceive them to care about protecting their reputation, and are more likely to meet customer expectations.

It should also be mentioned that, according to the social identity theory, individuals define themselves as members of certain social groups, and brand identity works in the same direction, facilitating the social identification of an individual within a group.

To test whether all of the above is true for Generation Z after the Covid-19 pandemic, authors conducted a research to assess the effects of hedonic experience on brand notoriety, product aesthetics, the brand’s identity and the attitude towards the product.

A total of 293 young people born between 1995 and 2010 and living in China took the survey.

Authors find that hedonic experience plays an essential role in brand visibility and product aesthetics, which in turn affects brand identity and associated behavioral reactions of consumers.

As expected, a favorable attitude toward the product encouraged repeat purchases of the same brand’s products. As people advance in age and careers, they tend to prefer products from well-known brands. Members of Generation Z, in addition, prefer to communicate through social networks using electronic devices and, in the same way, make much or most of their purchases online.

Because these consumers are well-informed and eager to learn new information, and to control their lives and futures, they are less loyal customers to retailers compared to other generations, such as Millennials.

On the other hand, China has the largest population of Gen Z members. Most are likely to achieve higher levels of education and income than members of previous generations, and thus are more likely to consume brands with international and stable reputations.

One way that future researchers can take advantage of this information is by testing it in other developed countries, and making comparisons to contribute form a universal theory of the brand, considering consumer behavior.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

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