Posts Tagged ‘commitment strategies’

Some fresh ground pepper for your chocolate souffle?

February 16, 2010

Dan Goldstein at Decision Science News recounts a wonderful little story featuring Shlomo Benartzi.

Decision Science News was having dinner with Shlomo Benartzi recently, not far from his beloved Four Seasons Hotel in New York. At the end of the meal, a chocolate souffle was ordered. Halfway through the souffle, Benartzi asked “would you like any more of this?” Decision Science News declined and watched as Benartzi took the peppermill in hand and peppered the souffle. The website was thinking that this might be interesting to taste, but then salt was added to the mix.

“There,” grinned Shlomo, “now we won’t eat too much. A little trick I learned.”

Assorted links

January 5, 2010

1) A high-tech substitute for the medical checklist.

Hat tip: Jason Bade.

2) Two manhole covers specifically for tourists. We could use these here in Chicago.

Hat tip: Danny Vincent.

3) More on the benefits of a nudge for long-term care insurance. The existing incentives aren’t strong enough to encourage long-term care purchases.

A decade ago, a handful of states—notably California, Connecticut, Indiana and New York—partnered with private insurers in an attempt to encourage people to purchase long-term care policies. As an incentive, these states allowed people to shield assets they might otherwise have to spend down in order to qualify for Medicaid. Since 2005, more than 30 states have taken similar steps.

Yet most observers have been disappointed by the results. “It’s not a model,” Feder says. “Even the most optimistic projections for the numbers of people it might cover over time don’t come remotely close to the coverage we have on health care—and we consider 16 percent uninsured a national disaster.” A 2005 study by the Congressional Research Service found that a majority of people who purchased these policies in California and Connecticut had more than $350,000 in assets—far more than the $55,000 held by the typical 55-year-old whom the program was hoping to reach.

4) The U.K. Natural History Museum has tacked on a voluntary tax-free donation of £1.50 to its £8 ticket price for online orders.

Hat tip: Jill Rutter.

5) Tweetwhatyoueat. Someone is really going to have to do a study on the effectiveness of all these twitter commitment strategies.

6) Don’t try to tackle all your new year’s resolutions at once. Spread them out over the course of the year.

Human routines are stubborn things, which helps explain why 88% of all resolutions end in failure, according to a 2007 survey of over 3,000 people conducted by the British psychologist Richard Wiseman.

Hat tip: Christopher Daggett.

Keep your new year’s resolution with a nudge

January 4, 2010

Social media nudges are popping up to help people keep their promises for 2010.

1) A site that lets you build an entire web page around a single goal and offers resources for helping achieve it.

2) Called “The New Year’s Nudge,” this facebook app posts your resolution on friends’ walls so they can keep you honest.

3) For those who want to live by a budget in 2010, a social media site that publishes the purchase history of your credit cards to friends — and even strangers, if you like.

Facebook is the marshmallow for these teenagers

December 21, 2009

That’s psychologist Walter Mischel, originator of the famous marshmallow experiment on self-control, describing the addictive properties of Facebook for today’s adolescents. To resist the temptation, some have devised creative commitment strategies.

After several failed efforts at self-regulation, Neeka Salmasi, 15, a sophomore at Greenhills School in Ann Arbor, Mich., finally asked her sister, Negin, 25, to change her Facebook password every Sunday night and give it back to her the following Friday night.

Full story in NYT.

Break the email addiction. For an hour, at least.

December 11, 2009

Is email snuffing out your productivity? Facebook? Twitter? You might consider this Mac application called SelfControl that blocks access to all three accounts (or just one) for a predetermined block of time of time. You can still surf the web though, since you might need that for some actual research. Most importantly, once you run the program, you can’t stop it – even by restarting your computer or deleting the application!

Hat tip: Magdalena Kala

Addendum: A new year’s resolution featuring SelfControl.

What do Kenyan farmers and American workers have in common?

November 11, 2009

1) They both pay a price for their procrastination. American workers pay when it comes to planning and saving for their retirements; Kenyan farmers pay when it comes to planning and purchasing fertilizer for their harvests.

2) They both love free shipping.

In a working paper titled “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya,” three economists from MIT, Harvard, and the University of California-Santa Cruz weigh in on a contentious policymaking debate with some interesting findings. Many policymakers consider fertilizer subsidies to be a standard tool for boosting agricultural productivity and economic growth in developing countries. Many economists criticize these subsidies as inefficient mechanisms, which are instead used to line politicians’ pockets and keep them in power. If Kenyan farmers behaved like econs, the economists’ argument goes, they would be able to figure out the exact amount of fertilizer necessary for generating more crops and more profits, all without the need for any subsidies. After all, it’s hardly a secret that fertilizer yields more crops, and since it can be bought and sold in almost any amount, farmers should easily be able to purchase the exact amount necessary for their plot of land.

But it turns out that most farmers behave like humans–71 percent of them according to the paper–by thinking they’ll buy fertilizer, which they’ll absolutely, positively buy…tomorrow. They overestimate their patience and planning talents, waiting until the last possible moment to buy fertilizer and ending up with not much of any. It is possible, authors Esther Duflo, Michael Kremer, and Jonathan Robinson say, that large subsidies could spur fertilizer purchases, but it is also possible that these subsidies could lead to wasted purchases, extra transaction costs, and fertilizer overuse among impatient buyers. (The consequences of saving too much seem less damaging than buying or using too much fertilizer.)

What if there was a commitment strategy that could help farmers use fertilizer more efficiently and boost crop yields?

Working with a non-government organization called International Child Support, the economists developed a plan to offer small, limited-time discounts right after the harvest when farmers have extra money from recent sales. The simplest form of the discount wasn’t much of a discount. Farmers were offered a voucher allowing them to pay full price for the fertilizer and get free delivery at a date of their choosing. But free delivery is a powerful incentive for a farmer who typically has to spend time and money going to town to purchase fertilizer. Farmers were also given the option to commit to these discounts before the harvest. The program could have offered discounts at different points during the harvest season, but the economists thought that earlier discounts would not need to be as big as later discounts in order to spur purchases. They tested the idea against a standard 50 percent subsidy and simple reminders about the importance of fertilizer (without discounts). Neither performed as well as the nudge. Simply offering free delivery early in the season increased actual fertilizer use by 46 to 60 percent, a bigger boost than with a half-off subsidy offered later in the season.

The Kenyan farmers example may offer some ideas for banks here in the U.S., which could certainly benefit from a healthier deposit base. There are many commitment strategies for saving – Save More Tomorrow being the favorite one from Nudge. The savings nudge with the closest resemblance to the fertilizer nudge is a debit card loaded with your tax refund. Aimed at Americans without bank accounts, the card provides a way to put cash aside without paying huge check cashing fees. Perhaps some marketing campaigns for special savings accounts or certificates of deposit with slightly higher interest rates could be offered around New Years Day, when people are always trying to make commitments, or tax day, when people have a few extra dollars in their wallet.

Of course, the real lesson from this nudge may be the power of free shipping. Would Americans accept lower interest rates or commit to locking up their money for longer periods if banks offered to pay the shipping costs (up to some amount) on their DVD and book purchases for the year?

Interested readers can find a full copy of the June version of the paper can be found here. A gated copy of the August version can be found here.

Assorted links

May 5, 2009

1. Foreign Policy traces the history of behavioral economics with this timeline in the latest issue.

2. One hundred and twenty six of the richest 300 colleges (based on endowment size) have curtailed cafeteria tray use. According to the group rating the environmental policies of colleges, the University of Chicago’s dining practices earn an A.

Dining Services purchases 20 percent of its food from local suppliers and contracts with a local dairy. The university is currently changing its dining hall format so that all meals will be served on reusable dishware. The university also offers reusable cups, mugs, and shopping bags.

3. A Mac application, Freedom, that disables networking on an computer for up to eight hours at a time, freeing you from the “distractions of the internet” and allowing you to do something better with your time.

Hat tip: Chad Valasek.

OMB Director Peter Orszag uses a commitment strategy for his marathon training

April 14, 2009

“If I didn’t achieve what I wanted to, a very large contribution would automatically come out of my credit card and go to a charity that I very much didn’t support,” Orszag says of his training strategy. “So that was a very strong motivation, as I was running through mile 15 or 16 or whatever it was, to remind myself that I really didn’t want to give the satisfaction to that charity for the contribution.”

He declines to name the charity.

Orzag on NPR. Hat tip: Economix, which also digs up a new favorite for our growing collection of alarm clocks. This one doesn’t turn off unless you feed it coins.

A reader comes up with an ascetic nudge to help him get into college

January 13, 2009

Courtesy of Felipe Insunza, an economics student at São Paulo University in Brazil.

To be admitted to any Brazilian university, especially one of high quality, students must pass a difficult exam that covers all the subjects taught in high school. The test covers basic subjects like math, Portuguese, biology, chemistry, physics, English, history, and geography. But, there are also very specific themes like botany, zoology, genetic, Mesopotamian history, analytic geometry, and stoichiometry, that students have to understand in order to do well on the exam. The competition for admission is intense – 20 to 30 candidates for every vacancy. Three factors largely determine your score. Do you have a good memory? Do you have strong study habits? Are you able to control your emotions?

After a one year of study, I won a spot in the Economics graduation, reaching the first collocation among more than 2,000 competitors. Along the way, I developed a self-punishment nudge to help me study more consistently.

For each subject, I had to study I had a little notebook. There were 25 subjects. There were 5 classes each day. For each subject, I carried a notebook with me to school. When I came home I had to study the themes taught in all of my classes. I also had the notebooks for subjects that did not have a class that day. Each afternoon, I studied yesterday’s subjects and today’s. If I did not study a subject, I hauled that notebook to school the next day in my backpack – even if I did not have class.

Whenever I had a backache, I said to myself, “You have to study more.” I knew I would be tempted to procrastinate. People think it’s better to study today, but we tend to think that will be easier to do that tomorrow, so we postpone, and then regret. I think that with this nudge, I created a short run trade-off between pain and laziness. If you want to sleep all day long your spine will be upset with you the next day.


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