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MRIA’s Net Gain 8.0 (2014) Annie Pettit: Behavioural Economics – New or Just New to You?

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The following are notes that I took live while Annie Pettit (Vice President, Research Standards, Research Now) presented at MRIA Net Gain 8.0.  There might be typos in the posting.

This posting includes a video clip with a summary by Annie Pettit of her presentation.

Behavioural economics is the application of insights and research from psychology to economics

Tenet of Behavioural Economics — Humans are Irrational

Behavioural Economics Discovered very recently

Adam Smith (1723-1790)

  • first acknowledged behavioural economics
  • human psychology is imperfect and could have an impact on economic decisions

Irving Fisher (1867-1947)

  • human factor in economic decison making impacted crash

Kahneman and Tversky, 1979

David Laibson

  • first conference in 1986
  • first official behavioural economics profesor in 1994
  • quarterly journal of economics devoted an entire issue in 1999

Ground-breaking research

People always share their honest opinions with researchers — examples why this is false

  • Solomon Asch, 1951 — conformity, people asked to estimate the length of a line chose the same answer as other people who were obviously wrong
  • Candid Camera, 1960s — people positioned themselves like everyone else in the elevator
  • Jenness, 1932 — people asked to estimate the number of beans in a jar almost always adjusted their count close to those of other people

I am the master of my domain — examples why this is false

  • Milgram obedience, 1963. Stanley Milgram, Yale University.  People will obey an authority figure who instructs them to perform acts that conflict with their conscience
  • ZImbardo experiment, 1971.  Situations determine human behaviour — split group of volunteers into prisoners and prison guards.  Had to stop experiment because guards were acting cruelly.
  • 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 control group.
  • Halo effect, 1920.  Edward Thorndike.  Overall impression can be based on one trait.  High correlation of physical, intellect, leadership skills, and personal qualities of soldiers.

Every behavioural economics study being imagined today has been done before — true.

Don’t expect the truth

  • it costs a lot so it most 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.

Impact on Market Research

Stop asking for opinions

  • would you pay
  • why do you like
  • why do you buy
  • why would you switch

Ask me what I have done

  • did you buy
  • have you paid
  • what did you pay
  • did your friend buy

Behavioural economics is a buzz word for market research.  Has been rediscovered, but it is very old.

 

 


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