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Behavioral economics has exploded over the last couple of years and market researchers have to begun to explore how it can be used in their work. But is it new or just new to you? This presentation outlines the growth of BE over the last 300 years and also describes some classic psychology experiments over the last 100 years. Moral of the story? If you just heard about a new theory of research, don't conduct research from scratch. Check what's already been done over the last few centuries!
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Behavioural Economics:New or just new to you?
Presented By Annie Pettit
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Behavioural economics is the application of
insights and research from
psychology to economics
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Tenet of Behavioural Economics
Humans are irrational
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Behavioural Economics Discovered
2012
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Adam Smith, 1723-1790• First acknowledged
behavioral economics
• Human psychology is imperfect and could have an impact on economic decisions
1700’s
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Irving Fisher, 1867-1947• “Human" factor in
economic decision-making was a potential explanation for the stock market crash of 1929 and the great depression
1930’s
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Herbert Simon, 1916-2001• Coined "bounded
rationality“ in 1955
• Humans don't possess infinite decision-making capabilities
• Nobel Prize in 1978
1955
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Kahneman and Tversky, 1979• Began significant
research in the field
• Published "Prospect Theory“ in 1979
1979
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David Laibson• First conference at
University of Chicago in 1986
• First official behavioral economics professor in 1994
• Quarterly Journal of Economics devoted an entire issue in 1999
1990’s
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Ground-Breaking Research
http://www.seti.org/seti-institute/news/senior-astronomer-seth-shostak-hollywood-and-science
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People always share their honest opinions with
researchers
False
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A B C
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Solomon Asch, 1951• Asch Conformity Experiments
– People asked to estimate the length of a line chose the same answer as other people who were obviously wrong
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Candid Camera, 1960s• People positioned
themselves like everyone else in the elevator
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Jenness, 1932• People asked to
estimate the number of beans in a jar almost always adjusted their count close to those of other people
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The first set of guesses on the sheet
are fake and deliberately over
guessed
The winner is…
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I am the master of my own domain
False
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Milgram Obedience, 1963• Stanley Milgram, Yale University
• People will obey an authority figure who instructs them to perform acts that conflict with their conscience
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Zimbardo Experiment, 1971• Philip Zimbardo,
Stanford University
• Situations determine human behaviour
19
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I know why I do things
False
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Cognitive Dissonance, 1959
• Festinger and Carlsmith, Stanford University
• People who received $1 for a boring task rated it more positively than those in the $20 and control groups.
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Jack Brehm, 1956• Students rated desirability
of household items. • Students chose choose
between two equally desirable items
• When asked to rate all items again, everyone increased the ratings of the items they had chosen and downgraded the ratings of their second-choice items.
=
>
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Halo Effect, 1920• Edward Thorndike• Our overall
impression can be based on one trait
• High correlation of physical, intellect, leadership skills, and personal qualities of soldiers.
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Every behavioural economics study being imagined today
has been done before.
True
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What does this mean for market researchers?
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Don’t Expect the Truth• It costs a lot so it must be good
• Everyone else likes it so it must be good.
• I’m sure I like it. The package is really nice.
• I NEED it now. I can’t wait for a sale.
• This Christmas music has no effect on my purchases.
• Knowing Justin Bieber likes this has no effect on my purchases.
• Advertising doesn’t affect me.
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Impact on Market Research• Stop asking for opinions:
– Would you pay…
– Why do you like…
– Why do you buy…
– Why would you switch…
– How much would you pay…
– Do you care if your best friends buys…
– Will you wait for the sale or buy it now…
– Do you care if the package is red or blue…
– Would you buy products made by children…
– Would you pay more for products made by Canadians…
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Impact on Market Research• Start asking for behaviours:
– Did you buy…
– Have you paid…
– What did you pay…
– When did you pay…
– Did your friend buy…
– Where did you pay…
– What did you buy on sale…
– What coupons did you use…
– What did you buy at full price…
– Did you buy products made by…
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Behavioural Economics is a buzz word for…
Market Research
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Behavioural Economics Discovered
2012
RE
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Thank you!
Annie Pettit
Chief Research Officer
Peanut Labs
@LoveStats on Twitter
www.peanutlabs.com
