Download - Behavioural Economics: New or Not?
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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
