Browsing by Author "Ariely, Dan"

Consumers often lack objective information about product acquisition costs. In such cases, consumers must rely on estimates of acquisition costs in making their choices. The current work examines the influence of mental simulations of product acquisition on estimates of acquisition costs. We suggest that simulations of product acquisition lead estimates to reflect the influence of consumers' current physical states on the experience of a particular cost. Specifically, carrying a heavy burden leads consumers to estimate higher distances to targets when they engage in simulation of walking to targets, but not when they do not engage in such simulation.

Simulation can be either deliberate or spontaneous. Deliberate simulation is engaged when consumers intentionally simulate an action. Spontaneous simulation requires particular conditions for its occurrence, but does not require conscious intent. The specific conditions for the occurrence of spontaneous simulation are the availability of situational inputs and that action be possible in the given situation. We support these ideas in a series of studies.

Study 1 demonstrates preference shifts that occur as a consequence of participants carrying heavy burdens. Participants in this study shifted their preference from an option located a visible but undefined distance away towards one that was available at their current location. Study 2 supports the theory that this shift occurs as a consequence of alterations in estimates of acquisition costs by showing that burdened participants estimate distances as greater than do unburdened participants.

Study 3 provides evidence for the role of mental simulation in producing such changes in estimated acquisition costs by showing that the distance expansion first demonstrated in study 2 occurs when targets are visible, but not when targets are not visible. This result is consistent with the central contention of this dissertation that visibility is critical for spontaneous simulation. Together, the studies support the role of spontaneous simulation in burden leading to distance expansion. Study 4 provides further support for the role of simulation in producing the effects of physical state on estimated acquisition costs by showing deliberate simulation results in similar distance to that of spontaneous simulation.

Studies 5 and 6 further demonstrate the dual roles of spontaneous and deliberate simulation on distance expansion. They show that expansion does not occur when targets are not reachable because they are up in the air (study 5). However, deliberate simulation of realistic (climbing - study 5) or unrealistic (flying - study 6) action restores distance expansion in those circumstances, supporting the role of simulation in leading to consideration of physical state in estimated acquisition costs.

The final study ties together these results by demonstrating the effects of both spontaneous and deliberate simulation in a single setting. Varying both the availability of conditions supporting spontaneous simulation and instructions for deliberate simulation the study allows an examination of the comparative effects of the two types of simulation and of their potential interaction. The study finds that deliberate simulation may produce effects that are larger than those of spontaneous simulation, but spontaneous simulation does not seem to enhance the effects of deliberate simulation.

Social media and mobile technology now provide consumers with the opportunity to continuously document or reflect on their moment-to-moment internal and external experiences. For instance, "tweets" are often written while one is consuming some experience, just as other forms of social media may be used in their respective ways for documentation or reflection while an experience is unfolding. But what effect does verbal documentation or reflection have on consumers' enjoyment of their time? The authors propose that when consumers can verbally document or reflect about topics other than the current experience, increased mind wandering can occur, which can help lead to reduced enjoyment. Testing the theoretical model through five experiments, the authors show that verbal documentation or reflection during an experience can reduce enjoyment, regardless of whether that experience is generally enjoyable or generally unenjoyable. However, the same effect does not occur when consumers are specifically asked to verbally document or reflect only about the experience they are taking part in. Verbal documentation or reflection right after an experience ends, which does not increase mind wandering during the experience, can lead to increased enjoyment when consumers are specifically asked to verbally document or reflect only about the experience they just took part in. Implications for the use of social media for verbal documentation and reflection by consumers and marketing managers are discussed.

The question of what leads an individual to act dishonestly interests researchers, policy-makers, and lay-people alike. While a growing body of research suggests that dishonest behavior is typically limited, and reflects a balance of internal and external incentives, important questions remain unanswered. To what extent is honest behavior guided by stable, internal factors (i.e. moral character), and to what extent is it shaped by situational factors? This question is the subject of continuing and recently revived debate. To what extent do socio-cultural factors impact dishonesty, and to what extent is dishonesty universal? Casual observation suggests significant cross-cultural variation in terms of specific dishonest behaviors (e.g. soliciting bribes), but this source of variation has received little research attention. In five related research chapters encompassing three studies, I explore questions about character and culture using empirical research methods. Using a behavioral die task, I find similar patterns of dishonest behavior across individuals from different countries, though within-country differences are also observed. Using survey data, I find that internal sanctions are the most important deterrent of dishonesty across cultures. In addition, I find that that specific dishonest behaviors vary across cultures, and according to domains. Domain-specific dishonesty and socio-cultural influences are also evident in a study involving socially connected pairs of individuals. I conclude that dishonest tendencies may be best characterized as both universal and culturally sensitive. Furthermore, moral character may be construed as a multidimensional construct, expressed differently across different domains of life.

Every consumer decision incurs a cost. An hour spent researching products is an hour not spent working. Vacation days used in the winter are vacation days not used in the summer. A dollar spent on a car payment is a dollar not spent dining out. What determines the extent to which consumers consider such opportunity costs when making decisions?

Although every purchase requires an outlay cost (i.e., spending dollars in order to obtain a good), outlay costs only have economic significance because some other good or service must be given up as a result. Consumers have unlimited wants but limited resources, so satisfying one want means not satisfying another (the opportunity cost). An opportunity cost is "the evaluation placed on the most highly valued of the rejected alternatives or opportunities" (Buchanan 2008) or "the loss of other alternatives when one alternative is chosen" (Oxford English Dictionary 2010). Opportunity costs are foundational to the science of economics and, normatively, consumers should account for opportunity costs in every decision they make. I define opportunity cost consideration as "considering alternative uses for one's resources when deciding whether to spend resources on a focal option."

Because consumers face opportunity costs, every purchase decision is effectively a choice among alternative resource uses, not just a decision of whether or not to make a particular purchase. When consumers consider their opportunity costs, alternative resource uses specify the broadest form of competition that products face: each resource use competes for share-of-wallet with all other potential resource uses. Understanding when consumers consider a purchase decision as an allocation across multiple options, and what those considered options are, allows researchers and practitioners to better understand why consumers make the purchases that they do, why they restrain from making the purchases that they do not, and how to influence purchases of focal options by increasing or decreasing consideration of alternative resource uses.

What determines when consumers consider opportunity costs? In Essay 1, I propose that consumers consider opportunity costs when they perceive immediate resource constraints. In Essay 2, I propose that consumers consider opportunity costs when the resource in use increases the accessibility of alternative resource uses in memory.

Beyond addressing when consumers consider opportunity costs, I address three additional questions. First, who is more likely to consider opportunity costs? Individuals with a high propensity to plan are likely to consider opportunity costs even when they are not immediately constrained. Second, which opportunity costs are consumers more likely to consider? Consumers are more likely to consider opportunity costs that are more typical of the category of possible resource uses than opportunity costs that are less typical of the category of possible resource uses. Third, what are the consequences of opportunity cost consideration? Individuals who consider their opportunity costs are more sensitive to their value than those who do not consider them. In addition to aiding our understanding of the consumer decision process, understanding opportunity cost consideration has important implications for consumers' sensitivities to the structure of the decision environment, understanding the nature of competition and cross-price elasticities, memory for foregone options, and construction of preferences.

Just as biological life becomes more interesting and diverse when the edges of ecosystems meet, intellectual life crackles with energy and possibility when leaders from different disciplines collaborate. The recent emergence of behavioral economics, a fusion of economic theory with psychological cognitive theory, represents the best of what can happen when different fields collide. Behavioral economists combine the sophisticated and nuanced anthropology articulated by cognitive theorists such as Nobel laureate Daniel Kahneman with classical economic theory to offer more realistic models and

expanded explanatory power, giving particular insight into why humans do not always behave in ways that are purely rational and self interested. I show that theological reflection and pastoral leadership, specifically, have much to gain by undertaking a similar `behavioral turn' and exploring the insights cognitive theory offers. By exploring the nature and history of the behavioral turn in economics and then showing the relevance to Christology and theological anthropology, I lay the groundwork for a `behavioral theology'. Behavioral theology sheds light on the Chalcedonian full divinity and humanity of Christ and underscores the view of sin as hubris. Behavioral theology also encourages pastors to see themselves as choice architects responsible for making decisions that help busy and tired congregants be the people they desire to be. Finally, I will demonstrate the experimental spirit of behavioral theology in a study of one facet of ecclesial life: church numerical growth and decline, using an approach inspired by behavioral game theory. With the permission of Duke's Independent Review Board I observed sessions, local church governing bodies in the Presbyterian Church (U.S.A.), play two versions of a public goods game to determine

whether the willingness and ability of leaders to cooperate, defect, reward, and punish one another correlates to a congregation's ability to sustain membership.

Consumers’ beliefs can influence enjoyment via beliefs about a product (e.g., whether a wine is believed to be high quality) and explored beliefs about themselves (e.g., where the consumers believes they have the expertise to appreciate any high qualities in a wine). Across nine experiments in five domains (e.g. film, tea, wine) we seek to better understand this latter and far less understood component by experimentally altering people’s subjective expertise (beliefs about ability in a consumption domain) independent of their real expertise and independent of real or framed differences in products’ qualities. We find subjective expertise alone generally increases two sources of enjoyments, item enjoyment (the enjoyment of an item’s qualities such as liking an item’s flavor) and process enjoyment (the enjoyment of consumer processes such as critically evaluating an item’s flavor). Importantly though, when consumption items are perceived to be lower quality, the subjective expertise effect on item enjoyment is eliminated but remains positive for process enjoyment. Additionally, subjective expertise leads consumers to engage in more actions and effort to improve their consumption (e.g. stirring a drink, learning more about a consumption item). This project improves general understanding of consumer expertise and consumer beliefs, finds subjective expertise has unique and often diverging effects on two sources of enjoyment important to everyday consumption, and demonstrates how and when subjective expertise can be altered to effectively enhance consumer enjoyment.

This dissertation consists of three essays on behavioral economics, with a general aim of enriching our understanding of economic decisions using behavioral insights and experimental methodology. Each essay takes on one particular topic with this general aim.

The first chapter studies savings behavior of the poor. In this project, partnering with a savings product provider in Kenya, we tested the extent to which behavioral interventions and financial incentives can increase the saving rate of individuals with low and irregular income. Our experiment lasted for six months and included a total of twelve conditions. The control condition received weekly reminders and balance reporting via text messages. The treatment conditions received in addition one of the following interventions: (1) reminder text messages framed as if they came from the participant’s kid (2) a golden colored coin with numbers for each week of the trial, on which participants were asked to keep track of their weekly deposits (3) a match of weekly savings: The match was either 10% or 20% up to a certain amount per week. The match was either deposited at the end of each week or the highest possible match was deposited at the start of each week and was adjusted at the end. Among these interventions, by far the most effective was the coin: Those in the coin condition saved on average the highest amount and more than twice as those in the control condition. We hypothesize that being a tangible track-keeping object; the coin made subjects remember to save more often. Our results support the line of literature suggesting that saving decisions involve psychological aspects and that policy makers and product designers should take these influences into account.

The second chapter is related to views towards inequality. In this project, we investigate how the perceived fairness of income distributions depends on the beliefs about the process that generated the inequality. Specifically, we examine how two crucial features of this process affect fairness views: (1) Procedural justice - equal treatment of all, (2) Agency - one's ability to determine his/her income. We do this in a lab experiment by varying the equality of opportunity (procedural justice), and one's ability to make choices, which consequently influence subjects’ ability to influence their income (agency). We then elicit ex-post redistribution decisions of the earnings as a function of these two elements. Our results suggest both agency and procedural justice matter for fairness. Our main findings can be summarized as follows: (1) Highlighting the importance of agency, we find that inequality resulting from risk is considered to be fair only when risk is chosen freely; (2) Highlighting the importance of procedural justice, we find that introducing inequality of opportunity significantly increases redistribution, however the share of subjects redistributing none remain close to the share of subjects redistributing fully revealing an underlying heterogeneity in the population about how fairness views should account for inequality of opportunity.

The third chapter is on morality. In this project, we study whether religious rituals act as an internal reminder for basic moral principles and thus affect moral judgments. To this end, we conducted two survey experiments in Turkey and Israel to specifically test the effect of Ramadan and Yom Kippur. The results from the Turkish sample how that Ramadan has a significant effect on moral judgments to some extent for those who report to believe in God. Those who believe in God judged the moral acceptability of ten out of sixty one actions significantly differently in Ramadan, whereas those who reported not to believe in God significantly changed their judgments only for one action in Ramadan. Our results extends the hypothesis established by lab experiments that religious reminders have a significant effect on morality, by testing it in the field in the natural environment of religious rituals.

This thesis is part of a broader collaborative research agenda with both colleagues and advisors. The programming, analyses, and writing, as well as any errors in this work, are my own.