February 12, 2010
1) The behavioral economics explanation for why more poker hands played means less money won.
2) Waiters who compliment customers get three percent bigger tips, on average.
3) Why were adjustable-rate mortgage applications where so misleading during the housing bubble? Because lenders showed post-teaser interest rates that equaled the rates were at the date of the loan closing. In an era of cheap money, this disclosure made loans look really cheap.
4) A version of the Google Powermeter for your exercise and sleep schedule. Hat tip: Mary Zhu.
5) Are you a British Gas customer? Have you gotten EnergySmart yet? Hat tip: Lukasz Walasek.
6) Video of a U.K. panel on nudging.
February 11, 2010
First Lady Michelle Obama is leading the new government initiative “Let’s Move” to reduce obesity in kids. Let’s Move is a comprehensive effort to combine healthier decision making about food and exercise with environments that help make those decisions easier.
As part of the initiative, a number of nudges will be used, including
1) Consumer friendly labels that take into account the actual sizes Americans now eat and are visible on the front of food packages.
2) Tax incentives to encourage grocers to open stores in what are known as “food deserts” — areas without access to fresh fruits and vegetables.
3) A collaboration with the American Academy of Pediatrics to encourage doctors to monitor children’s body mass index.
4) A national goal of having kids exercise for an hour a day.
Learn more about Let’s Move.
February 11, 2010
Says Psychology Today.
One advantage is obvious: Buyers scanning listings online usually set a minimum and maximum price. These are round numbers (often chosen from a menu on the listing site). In the example above, a buyer whose maximum price was $1 million would see a house listed at “$999,000 to $1,194,876,” but not a house listed at a single price higher than a million. (Of course, this depends on listing sites being able to handle price ranges.)
Another advantage of this trick is simple confusion. Just about everyone knows that a listing price of $X typically signals that the seller is willing to accept a good deal less than $X. In this market, few sane buyers are going to offer list price. Having two prices upsets this comfortable strategy. Do you offer the low price of the range? Less than the low price? Or do you make an offer somewhere in the range? Maybe you really, really want the house and want to make a preemptive offer. Do you offer the high price?
This suggestion still doesn’t get around the problem inherent in the behavioral economics diagnosis of the current housing market. Loss averse sellers don’t want to sell a property for less than they paid for it, or less than what they think it’s worth based on peak bubble prices. Whether she picks a range or a single price, the seller has to overcome the psychological hurdle or realizing that the value today isn’t the value yesterday.
February 9, 2010
Richard Thaler, speaking recently at a World Economic Forum panel.
“Let’s go back to Adam Smith,” Mr. Thaler suggested on a high-profile panel on Rebuilding Economics. “No, actually, let’s go back to Adam.”
“When it was just the demand for apples, the model still worked pretty well,” he said. “But today we have Apple and the iPhone pricing strategy.”
“Adam could deal with apples — as long as there were no serpents and women,” Mr. Thaler added. “When you add serpents and women, you get self-control problems that the model cannot deal with.”
February 9, 2010
The Academy of Motion Picture Arts and Sciences has adopted a new voting system for the 2010 race, and an article in this week’s New Yorker argues that it’s likely to harm Avatar’s chances. (Hat tip: Kare Anderson)
Instead of a simple ballot system where the movie with the most votes wins, the Academy is using a what is known as an instant-runoff system. It works like this: Voters rank the ten nominees in order of preference from 1 to 10. If no movie gets a majority of first place votes (which isn’t likely to happen, especially in early rounds), the last-place movie is dropped and the second choices on each of its ballots are redistributed to the other nine movies. This process continues until one movie finally has a majority of first choices.
Continue reading the post here.
February 7, 2010
Anne Stuhldreher follows up on the results of Save to Win in the Washington Post.
More than 11,000 Michigan residents opened accounts through the contest, saving $8.6 million throughout 2009. People can open the accounts — they’re like certificates of deposit — with as little as $25. They need to keep their money in for at least a year and can make deposits as small as $1 as often as they like.
More than half of the participants said they hadn’t saved regularly before opening their accounts. About 60 percent admitted they played the lottery during the past six months. And 44 percent earned less than $40,000.
With banks acting like lotteries, maybe it’s time for lotteries to act like banks. For people who can’t give up the thrill of a scratch off game, state lotteries could sell a, say, $5 ticket where $4.50 would be sent to a bank account. Seven other Michigan credit unions have adopted the model. One manager explained that the lottery style bank account proved more successful than a short-term CD with a 10 percent interest rate!
“We were very surprised,” Hubbard said. “It’s a breathtaking penetration rate, especially for a new product and one focused on saving, since that’s something our members don’t do.”
February 5, 2010
Readers have been interested in Bank of America’s Keep the Change program, which began in 2005, as a vehicle for boosting savings, and possibly charitable donations. There’s no charity option yet, but what about the savings benefits to participants? A 2008 Peter Tufano and Daniel Schneider paper has some answers.
Bank of America attributes 1.8 million new savings accounts to the Keep the Change program…and as of April 2007, its 4.3 million program participants had saved approximately $400 million collectively or about $93 on average – a steady rise from average savings of $30 in April 2006 and $67 in October of 2006.
How much has KTC benefited BofA?
Bank reports indicate that the program is a valuable customer acquisition tool, bringing in 1.8 million new savings accounts and 1.3 million new checking accounts over 19 months of program operation…The program has the potential to increase debit card use, can reduce bank costs associated with processing paper checks, and generate incremental interchange revenues from each debit card transaction…While the deposits generated by Keep the Change pale relative to Bank of America’s total assets of $1.46 trillion, the funds currently earn an interest rate of just 0.20 percent in the bank’s regular savings account permitting the bank to profit from the net interest margin.