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Behavioural economics & experimentation

Behavioural economics & experimentation. Dr Robert Metcalfe University of Oxford robert.metcalfe@merton.ox.ac.uk. Theory v reality. Our choices should only be influenced by theoretically relevant factors (e.g. prices) BUT we are often remarkably inattentive

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Behavioural economics & experimentation

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  1. Behavioural economics & experimentation Dr Robert Metcalfe University of Oxford robert.metcalfe@merton.ox.ac.uk

  2. Theory v reality • Our choices should only be influenced by theoretically relevant factors (e.g. prices) BUT we are often remarkably inattentive • Our choices should not be influenced by theoretically irrelevant factors (e.g. contexts) BUT we are often remarkably malleable

  3. Poor predictors • Humans poor at predicting the future • Consumer insight assumes a rational model of thought • ONLY ONE VALID method to show behaviour change: Field experimentation with randomisation

  4. “Ask me my three main priorities for NPD and I tell you randomization, randomization, and randomization”

  5. Advantages of experiments • Actually understand your customers and employees (i.e. behaviour) • Understand substitutes, complements and spillovers • Less subject to methodological debates and easier to convey • More likely to be convincing to CEOs, program funders, and policymakers

  6. Recent developments in behavioural sciences

  7. Importance of context

  8. Think about MINDSPACE Messenger who communicates information Incentives shaped by mental shortcuts Norms influenced by what others do Defaultsgo with the flow of pre-set options Salienceattention drawn to relevant novelty Priminginfluenced by sub-conscious cues Affectemotional associations shape actions Commitmentconsistent promises and reciprocity Egoseek to feel better about ourselves

  9. Messenger

  10. Incentives - loss aversion

  11. Norms

  12. Defaults • Switching from opt-in to opt-out in a USA savings scheme led to • enrolments rising from 49% to 86% • savings rate rising from 3 to 11%

  13. Salience Are Emily and Greg More Employable Than Lakisha and Jamal?

  14. Priming

  15. Affect

  16. Affect

  17. Commitment

  18. Ego – cognitive dissonance

  19. Who’s experimenting?

  20. Summary • We all have our skin in the predicting behaviour game • Behaviour is driven and changed by heuristics and contexts • Intentions do not highly predict future behaviour (poor validity) • Best way to evaluate products is through: Field experimentation with randomization

  21. Thank you robert.metcalfe@merton.ox.ac.uk

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