뇌 마음 행동 Behavioral Economics April 4, 2016 Sowon Hahn

Experiment Pick one of the choices.

Choice One Pick one A) You will receive $100 cash one week before the last day of this class. B) You will receive $101 cash on the last day of this class.

Choice Two Pick one. One week prior to the last day of the class you will receive A) tangerine B) chocolate bar The dollar value of both is identical. Of course, the tangerine is the healthier choice.

Choice Three Pick one. NOW, you will receive A) tangerine B) chocolate bar The dollar value of both is identical. Of course, the tangerine is the healthier choice.

Choice Four Pick one. A) You will receive $100 cash right now. B) You will receive $101 cash next week.

Research Results People who were not hungry, chose the unhealthy snack for delivery in one week prior to the last day of class 26 % of the time People chose the unhealthy snack for immediate consumption 70% of the time

Hyperbolic Discounting Would you rather receive $100 right now or $101 next week? Most people choose $100 right now. But when the choice is between $100 a year from now and $101 in a year and a week from now, people choose $101 in a year and a week from now. This is time inconsistent, as both choice involves delaying by one week for $1.

Incentives Incentive as “a means of urging people to do more of a good thing or less of a bad thing” Economic incentives Social incentives Moral incentives

What Do Schoolteachers and Sumo Wrestlers Have in Common? Freakonomics by Steven Levitt & Stephen Dubner

What Do Schoolteachers and Sumo Wrestlers Have in Common? Many people in different cultures and walks of lifefind subtle ways of cheating to advance their position or increase monetary awards when incentives are strong enough.

Incentives Economic incentives are those which a person responds to in the marketplace. Social incentives motivate people to respond in a certain way because they care (or are worried) about how they will be viewed by others. Moral incentives appeal to a person’s sense of right versus wrong.

How Is the Ku Klux Klan Like a Group of Real-Estate Agents? The Klan’s organizational structure is based on the secrecy. Once the “secret” was out, much of the membership was no longer willing to participate for fear of being exposed to the public. The real-estate agents can combine this superior knowledge with the buyer’s (seller’s) fear that he/she won’t be able to find a house to achieve a deal which is in the agent’s best interest.

What Makes a Perfect Parent? Considering that baby naming has become big business the question becomes, Does the child’s name matter when it comes to the child’s potential for economic success?

Correlation versus Causation Does a child’s name has any effect on his/her prospects for success? Regarding a child’s name, what the evidence tells us is that it is not the name that matters. Instead, what matters are the characteristics of the parent who gave the child his/her name.

Blink: Power of Thinking without Thinking

First Impression Decisions made very quickly can be every bit as good as decisions made cautiously and deliberately. Our snap judgments and first impressions can be educated and controlled.

Blink The J. Paul Getty Museum in California acquired a perfectly preserved marble sculpture of a nude male youth dating from the 6th century. It costs them $10 million. However, a number of art experts in the first two seconds of looking at the statue – in a single glance – felt an “intuitive repulsion” and proved that it was a forgery.

How our minds work (1) The first is the conscious strategy, which is logical and definitive; we think about what we have learned and we eventually come up with an answer.

How our minds work (2) The second operates below the surface of Consciousness. Our brain reaches conclusions without immediately telling us that it’s reaching conclusion.

Fast Thinking This strategy operates more quickly and has drawbacks. Do not weigh every conceivable strand of evidence and considers what could be gathered in a glance. Felt something, adopts “fast and frugal” thinking; Do not know why you knew, but you knew.

Affect as Information Risk as Feelings (Loewenstein et al., 2001) People's judgments of the costs and benefits of various technologies are negatively correlated, especially when the judgments are made under time pressure. (Melissa L. Finucane et al., 2000)

Unconscious decision making Whenever we meet someone for the first time, whenever we react to a new idea, whenever we are faced with making a decision quickly and under stress we use adaptive unconscious side of our brain.

The First Two Seconds A person watching a silent two-second video clip of a teacher she or he never met could reach similar conclusions about how good the teacher is, to those of a student who sat in the teacher’s class for an entire semester.

The First Two Seconds The power of knowing in the first two seconds is not a gift given to a fortunate few but an ability that all of us can cultivate for ourselves.

Rapid Cognition We are innately suspicious of it. We assume that the quality of a decision is directly related to the time and effort that went into making it

Thin Slicing A critical part of rapid cognition is the ability of our unconsciousness to find patterns in situations and behaviors based on very narrow slices of experiences.

Judging People’s Personality

Speed Dating

The Naked Face The face is an enormously rich source of information about emotion Information on our face is not just a signal of what is going on inside our minds. In a certain sense, it is what is going on inside our mind.

The Dark Side of Thin Slicing When we make snap judgments, we are vulnerable to being guided by our stereotypes and prejudices, even those we may not necessarily endorse or believe.

Intuition and Reasoning Two systems – Intuition (System 1) and Reasoning (System 2) "A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost?"

Intuition and Reasoning Fast Parallel Automatic Effortless Associative Slow-learning Emotional Slow Serial Controlled Effortful Rule-governed Flexible Neutral

Accessibility Perception and Judgment Natural assessments (Tversky & Kahneman, 1983) – Physical properties such as size, distance, and loudness, – Abstract properties such as similarity, causal propensity, surprisingness, affective valence, and mood.

Reference Dependence

Prospect Theory Prospect theory is concerned with short-term outcomes, and the value function presumably reflects an anticipation of the valence and intensity of the emotions that will be experienced at moments of transition from one state to another (Kahneman, 2000).

Framing Effect Asian disease, which is expected to kill 600 people. – If Program A is adopted, 200 people will be saved – If Program B is adopted, there is 1/3 probability that 600 people will be saved and 2/3 probability that no people will be saved

Framing Effect Asian disease, which is expected to kill 600 people. – If Program A is adopted, 400 people will die – If Program B is adopted, there is 1/3 probability that nobody will die and 2/3 probability that 600 people die

Framing Effect Default Option (Eric Johnson et al., 1993) If a car insurance full coverage is the default option (Pennsylvania), 79% chose the option, compared to 30% when it is not a default option (New Jersey). Other examples include organ donation and 401K contribution.

Attribute Substitution Substituting a specified target attribute of an object with another property which comes more readily to mind (heuristic attribute) Representatives, Availability, Anchoring

Peak/End Rule of Evaluation

What Motivates Us? Biological Source of Motivation basic biological needs motivate much of our behavior learning and experience influence how we satisfied our needs

behavior is motivated by instincts instinct theory Biological Sources of Motivation

behavior is motivated by drives that arise from biological needs that demand satisfaction drive theory Biological Sources of Motivation drive theory is based on homeostasis – a tendency of the body to maintain a steady internal state

– unmeet needs “push us” in a direction to satisfy them – incentives motivate us by “pulling” us toward them our attraction to particular goals or objects (incentives) motivates much of our behavior incentive theory Psychological Sources of Motivation

extrinsic motivation – reflects a desire for external rewards, such as money or the respect of one’s peers or family – “means to an end” intrinsic motivation – reflects a desire for internal gratification, such as the self- satisfaction derived from accomplishing a particular goal – “end in itself” Psychological Sources of Motivation

Autonomy, Mastery, Purpose Daniel Pink daniel-pink-drive-rsa-motivation/ daniel-pink-drive-rsa-motivation/ Science of What Motivates Us