Behavioral Economics


Friends of the Behavioral Economics Club, this week we present the paper “Search for solutions, learning, simulation, and choice processes in suicidal behavior” by Dombrovski, A. and Hallquist, M. H. (2021), in which authors make a revision about the decision making process and the solutions to the suicidal behavior considering the point of view of behavioral economics.

Suicide is one of the most important and significant causes of death in recent years, especially among young population. Every day thousands of people decide to carry out suicidal behaviors and, sadly, end their lives, which is an irreparable loss.

From the scientific point of view of behavioral economics, this can be seen as an unfortunate result in decision-making processes.

But before commenting the article, we think it is convenient to explain what suicide is. It would be the act deliberately initiated and carried out by a particular person, with full knowledge of its fatal outcome.

There is a series of risk factors, such as being male, suffering from pathologies (depression, psychosis, personality disorders or addictions), having a family history of suicidal behavior, having suffered childhood trauma, physical illnesses and cognitive deficits.

From a psychological point of view, many explanations have been given for this behavior. For example, the trap and escape frameworks, the interpersonal theory, the motivational-volitional theory, or the three-step theory. They all share a vision of suicide as an escape from intolerable emotional states.

However, most of the factors involved in all theories are specific constructs of suicide or depression and there is a lack of an external explanatory framework. In other words, explanations of the mechanisms underlying the suicidal process are lacking and, therefore, new perspectives are needed.

That is why authors propose in the article that formal learning theory and decision neuroscience can help us to understand the cognitive and decision processes that are involved in this behavior.

Within the suicide risk mechanisms, two personality characteristics appear: neuroticism and impulsivity. Neuroticism would be a tendency to experience frequent negative emotions such as anger, sadness or anxiety, symptoms that are called “internalizing”. On the other hand, impulsivity is an important component of the “externalizing” spectrum, which includes symptoms such as substance abuse or violence.

Studies on the subject are almost always based on self-report methods, such as dimensional surveys. The challenge is that internalizing and externalizing are broad and heterogeneous constructs that, when evaluated in this way, provide information that is not too relevant.

It would be more interesting to know about the personality of the individual so that it can tell us something about how he will respond to circumstances that could be part of the progression towards a suicidal behavior.

Authors are interested in studying cognitive limitations because they could explain people’s inability to consider the alternatives and consequences of suicide, due to cognitive control influences decision making.

For example, those who attempt suicide show deficits in autobiographical and long-term memory, but not short-term. This may jeopardize the generation of alternative choices and the memory-based simulations that evaluate them.

In summary, people who engage in suicidal behaviors may show deficits in global cognitive performance, memory, and cognitive control beyond what is expected in psychopathology, but the stages of the suicidal process to which these deficits may contribute remain unclear.

On the other hand, the suicidal process can be seen from the decision theory. People do not normally admit suicide as an option when they face life’s challenges. But then, the person experiences a great crisis that threatens her /his objectives and generates uncertainty, a crisis that generates a sense of urgency to solve immediately the problems.

But how can suicide be selected over the alternatives in a crisis? When it comes about choosing in suicidal behavior, most people cannot accurately predict how the crisis will unfold, and their estimates of the relative value of suicide versus alternatives end up being inconsistent with their interests.

Furthermore, escape theories emphasize intense negative affective states, which make a challenging situation feel catastrophic.

The suicidal crisis is marked by a sense of temporary pressure, triggered by imminent threats. Since the number of items selected in the set of considerations is limited by time and cognitive resources, fewer alternatives are included, because the person is under urgent pressure. And it may even be because his/her cognitive ability is being diminished.

Besides, there is the aspect of cognitive overload in suicidal crises. Patients generally feel lost, and the crisis intensifies when the cognitive demands exceed the capacity of each person to manage it. The need of evaluating many options at once due to uncertainty, degrades the quality of decision making.

Therefore, the authors note that it would be interesting for future studies to examine how people vulnerable to suicidal behavior deal with information overload and limitations such as time pressure.

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 and coping-related drinking motives in trauma exposed drinkers: Implications for the self-medication hypothesis” by Luciano, M. T.; Acuff, S. F.; McDevitt-Murphy, M. E. and Murphy, J. G. (2021), in which authors apply the point of view of behavioral economics to investigate why people that have suffered traumatic experiences have a higher tendency to use alcohol to cope with them.

In the paper we presented last week we saw how important it is to look for explanations and solutions to help when it comes about addictions, and plus, how behavioral economics can be used in order to that.

This does not surprise us, because, as we already know, behavioral economics is a discipline that comes from economy and psychology.

Authors of this paper are aware of this and wonder how behavioral economics can help understand complex behaviors as addictions. Particularly, alcohol abuse as a method to cope with traumatic experiences.

Previous investigations have shown that people that suffer from post-traumatic stress disorder endorse higher levels of coping-related drinking motives when compared to trauma-exposed individuals without this mental illness.

This suggests that alcohol consumption may vary according to the stress and anxiety felted by individuals.

Authors mention the called “self-medication hypothesis”. This posits that alcohol is used as an avoidant coping mechanism when faced with psychological symptoms or other subjective states of distress.

Nevertheless, this hypothesis does not explore many factors that can also influence or modify the consumption, as the presence of alcohol-free reinforcers in one’s environment, changes in the economic value of alcohol or the devaluation of the future.

From behavioral economics’ point of view, alcohol misuse is considered a reinforcer pathology that develops as a result of a persistently high valuation for alcohol, and a lack or deficit in substance-free activities available in the environment or personal context.

Behavioral economics uses concepts such as value of alcohol and the effect of reward delay on the decision-making process. Therefore, authors recommend exploring these factors among people exposed to trauma with psychological pathologies, particularly, individuals that suffer from post-traumatic stress disorder.

For instance, heavy drinkers with symptoms of stress and/or depression report greater alcohol demand.

Some previous studies have found that coping-related drinking motives may partially explain the relation between alcohol demand and alcohol consumption problems. However, this has not been studied according to behavioral economics’ concepts and point of view.

Authors comment they want to achieve two purposes with this studio.

Former, explore how behavioral economics’ constructs (such as access to environmental reward, delayed reward discounting, consideration of future consequences or alcohol demand) are related to alcohol problems in a sample of trauma-exposed adults.

Latter, evaluate if these constructs can explain additional variance in alcohol problems above and beyond coping-related drinking motives.

Authors gathered a total of 91 participants, which answered a series of questionnaires related to events lived in the past, alcohol consumption and emotion management. After that, results were analyzed.

In the sample, 43% of participants endorsed moderate levels of depression and anxiety; while 52,7% of them referred extremely severe problems of this kind.

According to the obtained results, authors comment that individuals with a trauma history may experience alcohol problems, in part, because they tend to be more focused on the present and devalue the future and its outcomes.

This study suggests that drinking-to-cope is an important consideration in understanding why trauma-exposed individuals often develop harmful patterns, like alcohol use, and that behavioral economics may shed additional light on this problem.

These patterns of behavior may effectively reduce the availability of substance-free rewarding stimuli and may shift the perceived relative value of prosocial and positive activities.

Thus, these individuals are at risk of experiencing less overall reward from prosocial alternatives that require engagement with the environment and, instead, lead them to engage in impulsive behaviors, such as alcohol abuse.

Some limitations exist in this study. Authors point out that their interpretation of the findings could be stronger if they had more assurance that all the individuals in their sample had symptoms that they could potentially use alcohol to cope with.

Authors comment how important is to keep investigating about alcohol abuse and addictions and how beneficial it would be to do it following behavioral economics. This would help to understand how the experienced trauma affects negatively to our lives.

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 “Social Preferences and Environmental Behavior: a Comparison of Self-Reported and Observed Behaviors” by Oliphant, Z.; Jaynes, C. M. and Moule, R. K. (2020), in which authors, using the behavioral economics’ perspective and games developed by it, study whether a relationship between our social preferences and our tendency to recycle exists.

That the Earth has limited resources is not new information for us. Neither is the fact that pursuing sustainability is a necessity in the modern society we live in.

But what is sustainability? The UN defines it as development that meets the needs of the present without compromising the ability of future generations to meet theirs.

Since the importance of this term has been recognized, many organizations have advocated implementing sustainable practices in an interdisciplinary economic, social and environmental setting. That is, there is a desire to “become green.”

Similarly, there has been a growing push for people, individually, to play a role in contributing to live in a more sustainable world.

Authors wonder if there is a way to study behaviors related to the environment, especially recycling, from the point of view of behavioral economics.

As it is a field with very little literature on the matter, they explored the possibility of establishing a relationship between social preferences, which are already being widely studied from behavioral economics, and the tendency of people to recycle or not.

They understand that both concepts can be related by the following idea. Classical economic theories of choice assume that individuals are interested in maximizing their benefits and minimizing expected costs, and act accordingly.

However, there are cases in which people deviate from the protection of their self-interest in ways that appear to demonstrate sincere concern for the well-being of others, or in other words, they have prosocial behaviors. For example, volunteering or donations.

These are altruistic behaviors that move away from the idea that the human being is selfish by nature, since they involve costs for the individual that are not necessary.

Taking these ideas into account, they wonder if it would also affect recycling, considering it is altruistic behavior.

On the other hand, authors investigate whether increasing the proximity and ease with which people can participate in pro-environmental behaviors, would influence and positively affect these behaviors.

For this objective, they organized an experiment in which 282 young university students participated.

At the beginning of this experiment, they were given questionnaires so that they made a self-report on their pro-environmental behaviors.

The experiment was based on playing two games commonly used in behavioral economics studies, called “ultimatum” and “dictator”. Two individuals are involved in both.

In the ultimatum game, one player has a certain amount of money and offers the other player part of it. If Player 2 rejects Player 1’s offer, they will both walk away with nothing.

In the dictator game, player 1 also offers a quantity of money to player 2, which must be accepted by the latter.

The results were interesting and surprised authors.

In the game of the ultimatum and the dictator, the majority of participants (59%) offered half of the total money that they imagined possessed. Only 3% of the sample did not offer any of their money to the second player.

An explanation for this can be altruism, but also, in the case of the ultimatum game, exists the idea that offering too little money could cause Player 2 to reject the offer and therefore both people would walk away with a total of 0.

On the other hand, the sample reported a high pro-environmental behavior in the self-reports, which suggested to the authors that they would recycle if they were given the opportunity to do so. When this opportunity was given, it was observed that 85% of the respondents did indeed recycle.

Regarding demographic factors and self-reports, it appears that men were significantly less likely to state that they act in an environmentally friendly way.

On the other hand, it was seen that, when participants had a container nearby where they could recycle, they did so without problems, so facilitating recycling would initially increase its practice.

The most important finding is that it seems that social preferences are not significantly linked to pro-environmental behaviors. That is, there is a lack of support that can be attributed to perceptions that the effectiveness of pro-environmental behaviors is weak and that respondents were skeptical about the willingness of others, or the community, to recycle.

One limitation would be that the experiment was carried out thanks to the participation of young university students and, therefore, they are not a reflection of the whole society.

Authors encourage those who create environmental policies to improve accessibility to recycling and coordinate their environmental sustainability efforts with the research conducted.

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 “Future Imperfect: Behavioral Economics and Government Paternalism” by Le Grand, J. (2018), in which the author reflects about the paternalists decisions of the government and their relationship with behavioral economics. 

Numerous economists, psychologists, and other experts have used the growing number of empirical research in behavioral economics to understand paternalistic government policies.

The main argument is that people make mistakes in judgment when it comes to their goals; consequently, governments intervene in politics to correct these errors and, therefore, help people to achieve their proposed ends.

The interventions would exist in a wide variety of areas: taxes, licenses, the prohibition of potentially harmful activities for health, subsidies, and so on.

However, many other experts have questioned these arguments and the government policies associated with them, commenting that they unjustifiably and arbitrarily offer privileges to a particular set of preferences. In this article, the author reflects about this idea.

He first explains that there are two types of paternalism: the one related to the means and the one related to the ends. The idea is that individuals have objectives, goals, values, which are part of our life plan, among which we choose, looking for ways to achieve them.

Paternalism related to ends occurs when a government agency considers that some individuals have not adequately considered their own ends or objectives and, therefore, replaces them according to its own conception of what is good, trying to alter the behaviors of the individuals that are relevant for its achievement.

The paternalism related to the means occurs when the agency accepts the ends of the individuals, that is, it accepts their conception of life and the objectives they pursue, but observes that individuals make mistakes when trying to achieve these objectives and decides to intervene to correct them.

How can we relate the challenges of this issue to behavioral economics?

Experts who defend this position of the government comment that it is a way of adjusting decision-making to the neoclassical axioms of rationality.

To correctly understand this whole idea, the author proposes an example.

When 18-year-old Jane goes to buy a pack of cigarettes, the agency considers that if she does this, she will be at high risk for lung cancer and/or other smoking-related diseases in the future. Furthermore, the agency judges that this will reduce the expected value of her future utility and welfare. Therefore, the agency considers that it is justified to try to interfere in some way with Jane buying those cigarettes.

The main objection that occurs to all of us is that this intervention would interfere with Jane’s autonomy, so it could only be tolerated if the harms to Jane’s autonomy were minimized as much as possible with the methods chosen for the intervention.

In addition to damaging the autonomy of the individual, the agency would also be questioning her decision-making process. 

Returning to Jane’s example: no one on the planet is unaware that smoking is a health risk, so it is reasonable to think that she knows it too and has taken this knowledge into account in some way in the judgment that led her to make her decision . So what is the agency’s basis for deciding that Jane’s judgment should be superseded by their own judgment?

Well, there are some reasons why the agency might consider this idea. First, they may believe that Jane is making her decision based on misinformation. In this case, the agency’s responsibility would be to provide her with correct information or to ensure that she has access to it.

Later, the agency might think that the decision is wrong because in her judgment, Jane is using the wrong discount rate in her expected value calculations. That is, when Jane evaluates the contributions that current and future actions make to her lifetime utility, she considers present actions more important than future actions, contrary to what the agency believes.

The reason Jane acts like this is likely due to her assessment of the uncertainties involved in any assessment of the future. If the government agency has a different assessment of this uncertainty, their role would be to provide Jane with this information and then allow her to make her decision. If the agency were to hinder or impede Jane’s activities due to lack of information about the risks, it would be unjustifiably paternalizing.

There is also the idea that the agency is defending the benefits of the Jane of the future while Jane is defending the benefits of the Jane of the present.

As we can see, we could reflect long and hard on this topic, since human decision-making is a complex process, like everything that derives from human behavior.

This article accepts that government interventions may favor certain preferences, but not arbitrarily. Furthermore, it could be justified by the desire of the individual’s governments to maximize his life well. The idea is that the future will never be perfect, but with proper government intervention it can be improved.

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 “The role of behavioural economics in shaping remedies for Facebook’s excessive data gathering”, by Mäihäniemi, B. (2022), in which the author talks about the usefulness of behavioral economics applied to data protection in social networks’ context.

Social networks can exploit users’ online behavior using data collection techniques, it is a reality. 

Rather than competing for better consumer protection, these companies often seek to attract and exploit consumers by exploiting their weaknesses, such as overconfidence and optimism. 

Naturally, this is not the case for all companies, and some do, in fact, offer greater privacy options as a differentiating factor. However, the vast majority do not work this way. 

Data is collected through the provision of free services that allow large companies to gather information about users’ online behavior. 

This concept we have, as users, that companies offer us their services for free, is misleading, as consumers pay for these services in other ways. One of them is by providing this information.

Although extensive data collection has become the accepted business model for most, it does not seem to be the best for the welfare of users; in fact, in specific situations, it is a problem, for example, an abuse of exploitation of market power that does not respect data protection. 

The main issue is voluntary consent to data collection in the context of a dominant company, and the problem of lack of user self-determination, which may diminish consumer choice and, consequently, consumer welfare.

Excessive data collection is evident, for example, when a fully personalized experience on social networks or mobile apps depends on users’ consent to the collection of their data on third-party websites. Such collection is problematic for several reasons: for example, it could be seen as exploitative abuse under competition law, as dominant companies take advantage of consumers’ vulnerability to collect valuable data. 

Currently, users ignore the low level of privacy protection and allow excessive data collection by major online platforms. In return, they receive personalized services from them. But the fault does not lie entirely with consumers, as companies exploit a number of cognitive heuristics and biases that are specific to consumers. 

The article aims to identify the circumstances that support excessive data collection and argues that those who possess the information exploit heuristics that lead to cognitive biases and take advantage of the power and information asymmetries that consumers face. 

Behavioral economics forms the theoretical basis of the article, as both heuristics and information biases and asymmetries have been extensively researched by behavioral experts. You can refer to the original article for more information on this. 

When users face dominant intermediaries, users deliver their specific and personalized data, however, such data collection often occurs in a questionable way. What’s more, the harm caused by data collection is difficult to understand; some users may not even know that their data is collected outside of the platform. 

How can behavioral economics help the law design remedies that increase the transparency of online platform operations in relation to excessive data collection? 

Several proposals are offered. For example, the possibility of data portability. This would reduce switching costs and could lead to greater competition between platforms. The right to portability would guarantee users effective and immediate access to their data generated while using the dominant platform. However, this does not seem to be the most appropriate according to experts. 

On the other hand, the most important means to address the power and information asymmetries between these platforms and their users would be to use consent as a way to increase the transparency of data collection. For example, separate consent may be required to collect different data if this collection is unnecessary for the core services that the user accepts when using the platform.

Finally, the idea of an “opt-out regime”, in which users do not automatically agree to surrender their data, has also been proposed. However, this solution fails to eliminate the power asymmetry.

The author recommends further research on how behavioral economics can be applied in this context, as research on the effects of social networks on human behavior, society and justice is still very limited. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

Friends of the Behavioral Economics Club, this week we present the paper “Predictors of Counseling Participation Among Low-Income People Offered an Integrated Intervention Targeting Financial Distress and Tobacco Use”, by Tempchin, J.; Vargas, E.; Sherman, S. and Rogers, E. (2022), in which authors carry out a study in which they propose a special method to reduce tobacco addiction, in which they combine concepts like financial education, health and long-term objectives.

Smoking was first identified as a public health threat in the United States almost 60 years ago. Since that time, tobacco addiction and the number of people who occasionally smoke a cigarette has declined by almost 30%. 

However, smoking rates among people with low or very low incomes remain high. 

Currently, people over 18 years of age living at or below the poverty line are twice as likely to smoke as those who have better economic conditions. 

Part of this may be because people with a wealthy and stable economic situation can afford access to personalized and effective treatment to overcome their tobacco addiction.

Although several interventions have been shown to be effective in the short term, there are many that fail in the long term for those at greatest risk and vulnerability. 

Having a low income is usually an indicator of more complex problems. One of these is poor financial health or education. This is a social determinant and actually affects many more areas of life apart from people’s economic status. It is someone’s ability to manage their expenses, cover their needs, minimize and recover from financial crises, minimize their debts and generate wealth. 

Poor financial health or training is associated with poor physical and mental health, overall well-being, and is one of the greatest sources of chronic stress among adults in the United States. 

In people with lower incomes, stress in general and financial stress in particular, are very significant barriers to long-term smoking cessation. 

In addition, behavioral economics research suggests that financial deprivation induces people to focus on their most immediate and survival needs, leaving them without the emotional and cognitive resources necessary to resist immediate gratification and prioritize goals that are deferred and whose benefits will be seen in the non-immediate future, such as quitting smoking. 

Interventions with financial incentives are quite common in studies in the field of behavioral economics and generally have a positive effect. That is, providing a temporary monetary reward for quitting smoking is effective in increasing abstinence rates in the short term. 

But what about the long term? Small monetary rewards for quitting smoking do not remedy structural financial difficulties, nor do they help people not to return to the addictive habit over time.

A trial has been conducted this past year that demonstrated that a smoking cessation intervention incorporated money management training and education and, although only half of the people enrolled attended the sessions, 85% of them completed the training and were successful in quitting smoking

Based on this trial, authors decided to conduct a similar study themselves, involving 208 New York adults with household incomes below the federal poverty line who had smoked at least one cigarette in the past 30 days.

Up to nine individual counseling sessions in financial education were offered, and all participants also received a program that included smoking cessation training.

The results showed that the rate of attendance at the interventions, and the success of the interventions, increased as the age, education and income of the participants increased. This finding is of concern, because then, the younger people are, the less education they have, and the lower their income, the greater their likelihood of having a tobacco addiction. In other words, when vulnerability increases, the risk of smoking increases. 

On the other hand, it seems that other factors such as being an immigrant, having high levels of psychological distress or anxiety disorders, being unemployed, having low levels of literacy, or very little motivation to quit smoking also contributed to increase the risk of addiction. 

Authors point out the need to devote more efforts and resources to research on smoking, since, as we have pointed out in the first lines, it is one of the most serious health problems that currently affects millions of people around the world.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

Friends of the Behavioral Economics Blog, this week we present the paper “Behavioral Economics and Tobacco Control: Current Practices and Future Opportunities” by Littman, D.; Sherman, S. E.; Toxel, A. B. and Stevens, E. R. (2022), in which authors think about how we could apply the seven basic principles of behavioral economics to prevention campaigns of tobacco use. 

Improving tobacco control and treatment remains a medical priority. Despite progress in recent years, smoking remains the leading preventable cause of death in the United States, causing 480,000 deaths annually and $300 billion in related economic losses.

Current behavioral and medical treatments have been successful, but not enough. To address the considerable health burden (even worse now as we continue fighting against Covid-19), there is a continuing need to develop better tobacco use control and prevention interventions. 

By combining elements of economics and psychology, behavioral economics provides a framework for designing novel solutions to help smokers quit when traditional interventions have failed to do so. 

The principles of behavioral economics, according to Dawnay and Shah, would be “other people’s behavior matters”, “habits matter”, “people are motivated to do the right thing”, “one’s own expectations influence behavior”, “people are loss averse”, “people are bad at calculating”, and “people want to feel involved and effective”. In total, 7. 

However, the full list of principles has not been widely used in the field of tobacco control and treatment or prevention. The vast majority of related studies focused on financial incentives and few were devoted to other principles. Therefore, this is what the authors propose: to expand the potential application of the 7 principles to tobacco control and treatment. 

In a quick compilation of behavioral economics articles applied to tobacco prevention and treatment, 198 articles out of 230 were about financial incentives. But what about the other possibilities?

The authors mention that other people’s behavior matters. That is, when making decisions, people tend to model their own behavior based on those around them. The extent of influence of others’ behavior also relates to who has the most influential personality. The ingroup bias suggests a predilection for modeling the behavior of those with a shared social identity. Even celebrities would influence normal people. 

Future research could evaluate the performance of campaigns by influential people who have quit smoking and their results, which may encourage viewers to follow their path.

The second principle mentions that habits matter. Behavior is habitual and we always follow routines. Relying on habits reduces the mental energy required to complete tasks, even if the habits are not efficient or healthy. Habits provide opportunities for behavior change, first by using current ones, and also by creating new ones.

Future research may evaluate replacing cigarettes with e-cigarettes, for example, so that the habit of smoking continues, but harm is reduced. 

Authors also mention that people are motivated to do the right thing. The perception that an action is carried out for the public good or for the good of others influences behavior. Appealing to people’s sense of altruism can be an effective and efficient approach to behavior change.

On the other hand, there is the idea that one’s own expectations influence behavior. This happens because people want their actions to be in line with their values and commitments. Engaging openly with friends, family and even strangers may increase the extent to which behavior change occurs, which could be used in this context. 

The fifth principle is that people are loss averse. Behavioral economics research suggests that losses produce more emotional reactions than gains. Developing and testing interventions that change the framing of economic incentives to exploit this principle could be interesting, focusing not so much on gaining something, but on losing it. 

On the other hand, people tend to be bad at math. Many studies suggest that humans have a poor understanding of probability and statistical concepts in general, which helps explain the popularity of playing the lottery. To exploit this lottery’s appeal, smokers could be told what they could have won if they had completed an action related to quitting smoking, for example.

Finally, the seventh principle: people want to feel involved. Classical economic theory posits that giving people more choices results in better decisions, as long as it doesn’t become overwhelming. Balancing the two ideas, increasing self-efficacy by helping smokers understand their options for quitting and emphasizing their ability to quit, makes people more likely to quit for good. 

Authors encourage the continued development of projects dedicated to the treatment of smoking from behavioral economics, as they believe that it provides very good ideas to achieve positive results for such a representative problem for the health of people around the world. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

Friends of the Behavioral Economics Blog, this week we present the paper “Top Ten Behavioral Biases in Project Management: an Overview”, by Flyvbjerg, B. (2021), in which the author explains a series of biases related to cognition, politics and power, that he considers fundamental to bear in mind in project management. 

Since the early work on biases by Tversky and Kahneman in the 1970s, the number of biases identified by behavioral scientists has skyrocketed in what has been called “a behavioral revolution” in economics, management, and the social and human sciences. 

In this article, the author gives a description of some behavioral biases that he considers particularly important in project planning and management, so if you are a project manager, you should pay attention! 

The biases chosen by the author are those that, from his point of view, are most likely to trip up project planners and managers, negatively impacting project outcomes if the biases are not identified in advance and addressed early. 

The author argues that behavioral biases are not limited to cognitive biases alone, but that “political biases” also come into play. 

For him, behavioral economics in its current form focuses too much on cognitive psychology: economic decisions are taken into account too much in psychological terms, the author believes that more attention should be paid to political, sociological and organizational perspectives. 

Political biases, therefore, would be those arising from power relations, particularly important for big decisions and projects. For decision making in hierarchical organizations, involving office politics, sales techniques, economic funds, etc., political biases would be very useful. 

Some of them are the illusion of control, the conservatism bias, the normality bias, the topicality bias, the neglect of probability, the cost-benefit fallacy… among many others. The author decides to focus on some of them, although here we will not be able to name all of them, if you want to know more, we recommend reading the original article. 

On the one hand, we have the optimism bias, which is cognitive, and refers to the tendency of people to be overly optimistic about the results of planned actions. 

In optimism clutches, people are not aware that they are being optimistic. They overestimate the benefits and underestimate the costs. They involuntarily misrepresent success scenarios and overlook the potential for mistakes. As a result, plans are unlikely to yield the expected benefits. 

Another interesting bias is the uniqueness bias, which psychologists have identified as the tendency of individuals to see themselves as more unique than they really are, e.g., uniquely intelligent or attractive. 

This bias is particularly interesting in project management, because project planners and managers are systematically “primed” to see their projects as unique and different. This bias tends to prevent these managers from learning, because they think, precisely, that they have little to learn. And this, research has shown, leads managers to be affected by this bias performing worse than others. 

By seeing things from this perspective, planners focus on the specific circumstances and components of the project they are developing and look for evidence in their own experiences, to the detriment of the final project. 

This bias increases the underestimation of risk, leading to risk-taking that probably would not have been accepted if the actual probabilities had been known. 

There is also the planning fallacy, which the author classifies as a subcategory within the optimism bias, which arises from individuals producing plans and estimates that bear little resemblance to reality. It is the tendency of individuals to, on the one hand, underestimate the costs, schedules and risks of planned actions, and, on the other hand, overestimate the benefits and opportunities of actions, creating risks for projects. 

The author also mentions anchoring, which is the tendency to rely too much or “anchor” on one piece of information when making decisions. Anchoring feeds into other biases, such as availability bias and topicality bias, which induce people to anchor on the most readily available, easily accessible information, as well as the most recent information. This results in the underestimation of probabilities in general, and therefore of risks in particular. 

The author names other interesting biases, but we have made a small selection here. He also recommends further research on the subject, since biases affect human beings in all facets of their lives and, therefore, knowing about them is not only useful for business or interpersonal relationships, but also for oneself. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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. 

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