With most of its attention captured by the global fervor around 'big data', the banking industry has failed to give behavioral science the attention it deserves. I argue that, considering today’s challenges to fully take advantage of big data, implementing insights from behavioral science is a more cost-effective approach to improve customer experience in banking.
It is no secret that too few households save for a rainy day and this financial planning problem is a difficult habit to break. Would knowing your neighbours’ savings balance encourage you to save more?
It’s almost impossible to rationally plan old age, given that decisions in this domain are complex, jointly made and emotional. I argue that behavioral economics can help us understand some of our common decision-making barriers, such as dealing with decision avoidance, reframing old age positively, and designing interventions to better forecast our needs in old age.
Using cognitive mechanisms (commitment, loss aversion, social norms and suchlike), I hacked myself to boost my motivation for exercise and healthy habits, get in shape and lose 15 kilos (33 pounds)… all in a record six months.
People use awards to incentivize positive behaviors all the time. Our research shows that, in some contexts, awards do not work and can even demotivate the target behavior. We find that awards might send unintended signals to recipients about the social norms and institutional expectations for the target behavior. Organizations and leaders considering using awards should know that awards can have more complicated consequences that might be intuitively expected.
Charities have different moral objectives. Some seek to promote welfare (e.g., Red Cross), but others seek to promote justice and equality (e.g., ACLU). We demonstrate how these different charities can employ specific positive emotions in their campaigns to nudge donations. Charities that seek to promote welfare should utilize compassion in their campaigns, but charities that seek to promote equality in society should utilize gratitude in their campaigns.
How much information do you need to make up your mind? Our research in various domains of decision making shows that we make decisions more quickly and based on less information than we think. This has important implications in an age in which information is plentiful.
Robo-advisors help investors deal with the complexity of the stock market. However, users of these new decision support systems are not immune to decision inertia – repeating supoptimal investment strategies regardless their negative financial consequences. I investigate two possible nudges to help user overcome decision inertia in robo-advisory environments.
Nudges have become popular policy instruments, for good reasons. However, recent studies show they might sometimes backfire or cause undesired distributional effects – differing impacts across people. Such studies highlight the importance of careful policy analysis that examines both the average and distributional impacts of nudges.
Heuristics play an important role in daily judgments and decision-making, but a scientific debate has been ongoing as to whether heuristics result in systematic errors or make us smarter. Both approaches have resulted in tools to support decision-making. Nudges address systematic errors and biases, while boosts support informed decision-making under uncertainty. But can these two opposing approaches be integrated into one framework?
