Behavioural economics in industry

I was delighted to find a hidden gem at the back of the Living section of Saturday's Toronto Star, a story about a behavioural economics book co-written by Hewlett-Packard behavioural economist Kay-Yut Chen (the article does not appear to be available online).

The article itself was not earth-shattering, but I was surprised to see that Hewlett-Packard employs a behavioural economist to conduct experiments that could help improve their business. The workplace is a logical place to run economics experiments, but because it's a fairly new field one doesn't hear about companies running their own experiments very often. Charities are one area that has seen the benefit of experimental economics, with several running experiments in recent years in an attempt to learn how to fundraise more efficiently. But for the most part, economics experiments still take place in academic labs (CIRANO in Quebec is probably Canada's most prominent) rather than in the workplace.

Industry seems like it's slowly starting to see the benefits it can reap from economic research. Google poached respected economist Hal Varian from Berkley in 2007 to help them take better advantage of all the data that Google searchers generate, but he's the only example of a prominent economist in a private-sector research position that I can think of. So I was pleased to see that Hewlett-Packard also has an economist. I'll have to pick up a copy of his book.

Married people can get along (sometimes)

Economics isn't usually very romantic (just ask my girlfriend), but in the spirit of Valentine's Day I thought I'd share an experimental economics working paper probing how married couples interact with each other. It was released in December by three French economists.

The researchers recruited 100 married couples from the Toulouse area and pulled them into their lab to play a prisoner's dilemma game with both their partner and with other people.

The prisoner's dilemma is a game where you choose to either cooperate or "defect" with a partner. If both people cooperate, you get the best possible payout from the game, but if your partner defects while you try to cooperate, you do really badly. Thus, if you don't trust your partner to cooperate, it makes sense for both people to defect, even though you'll be worse off than if you both cooperated.

Do car mechanics try to sell repairs you don't need?

In experimental economics, an easy study to do is run a simple economic game and see if different groups of people behave differently.

For example, I blogged in November about a study that looked at whether government employees are more selfish than the average worker when asked to donate to a charity. Another example: some health economists I know are interested in whether doctors behave differently than other businesspeople because of their Hippocratic Oath.

Add sneezing to the list

Recently, I blogged about how lemon-scented Windex and AC-DC music can affect the results of economic experiments. We can now add another factor to that list: sneezing.

Researchers in Michigan found that a pollster who sneezed before handing over a survey about health led to lower approval of the American health care system and predictions of lower health outcomes for Americans by survey respondents than when the pollster didn't sneeze.

Thanks to the Freakonomics blog for this one.

Scented nonsense?

You may have read this one in your local paper: lemon scents make people more trustworthy, charitable and generous. The study by Katie Liljenquist (Brigham Young), Chen-Bo Zhong (University of Toronto) and Adam Galinsky (Northwestern) has apparently been accepted for publication in Psychological Sciences.

Basically, the researchers got subjects to play a trust game where subjects could pass money between each other or keep it. Money that was passed got multiplied, but there was a chance the other player could screw you by not passing much money back. Subjects were either in a room which was sprayed with lemon-scented Windex, or a room that wasn't. The subjects who were in the Windexed room passed more money back and forth.

The researchers did another experiment where people filled out a questionnaire about their wilingness to volunteer and donate to Habitat for Humanity. People in the Windexed room claimed to be more charitable and more willing to volunteer than people in the normal room.

Monkey-see, monkey-do

I think humans tend to follow the monkey-see monkey-do practice more than we think.

I went for a $17 haircut yesterday and was planning on tipping to $20 (it seemed like a nice round number) until I noticed that the customer before me didn't tip at all, even though he remarked on how pleased he was with his cut. I changed my mind and decided tipping to $19 would be more appropriate.

Likewise, I frequently visit one of the Tim Horton's on campus for their Iced Cappucinnos. They require a straw, which at Tim's is always wrapped in paper. So it's not uncommon to see a bunch of crumpled-up straw coverings on their counter (and sometimes an assortment of other garbage -- I saw a Kit Kat wrapper there the other day). When there are straw wrappers already on the counter, I usually leave mine behind as well. But when the counter is clean, I usually feel guilty about being the first to litter and tuck the wrapper in my pocket to dispose of later.