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October 4, 2010

Defaults: Tools of choice architecture

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TYPES OF DEFAULTS AND HOW TO SET THEM

Defaults are settings or choices that apply to individuals who do not take active steps to change them (Brown & Krishna, 2004). Collections of default settings, or “default configurations” determine the way products, services, or policies are initially encountered by consumers, while “reuse defaults” come into play with subsequent uses of a product. At the finest level, a single question can have “choice option default”, which on electronic forms can take the shape of a pre-checked box (Johnson, Bellman, and Lohse, 2002).

Defaults have been shown to have strong effects on real-world choices in domains including investment (Cronqvist & Thaler, 2004; Madrian & Shea, 2001), insurance (Johnson et al, 2003), organ donation (Johnson & Goldstein, 2004), marketing (Goldstein et al, 2008) and beyond.

They have a wide appeal among marketers and policy makers in that they guide choice while at the same time preserving freedom to choose. They are often regarded as the prototypical instruments of libertarian paternalism (Sunstein & Thaler, 2003).

Through default-setting policies, choice architects exhibit influence over resulting choices. The palette of policies includes simple defaults (choosing one default for all audiences), random defaults (assigning a configuration at random, for instance, as an experiment), forced choice (withholding the product or service by default, and releasing it only after an active choice is made), and sensory defaults (those that change according to what can be inferred about the user, for example, web sites that change language based on the visitor’s IP address).

Products and services that are re-used can also avail themselves of persistent or reverting defaults (which, respectively, remember or forget the last changes made to the default configuration) and predictive defaults (which intelligently alter reuse defaults based on observation of the user).

Those setting defaults should be aware of the ethical risks involved (Smith, Goldstein & Johnson, 2010). The ethical acceptability of using a default to guide choice has much to do with the reason why the default has an effect in the first place. When consumers are aware that defaults may be recommendations in some cases and manipulation attempts in other cases (Brown & Krishna), they exhibit a level of “marketplace metacognition” that suggests they retain autonomy and freedom of choice. However, if defaults are effective because consumers are not aware that they have choices, or because the transaction costs of changing from the default are too high, defaults impinge upon consumer autonomy. An often prudent policy, though not a cure-all, is to set the default to the alternative most people prefer when making an active choice, without time pressure, in the absence of any default. Running an experiment on a sample of the greater population can determine these preferences, and can be done in little time and at a low cost in the age of Internet experimentation (Gosling & Johnson, 2010).

REFERENCES

Brown, Christina L. and Aradhna Krishna (2004), “The Skeptical Shopper: A Metacognitive Account for the Effects of Default Options on Choice,” Journal of Consumer Research, 31 (3), 529-539.
Cronqvist, Henrik and Richard H. Thaler (2004), “Design Choices in Privatized Social Security Systems: Learning from the Swedish Experience,” American Economic Review, 94 (2), 424-428.
Goldstein, Daniel G., Eric J. Johnson, Andreas Herrman, and Mark Heitmann (2008), “Nudge Your Customers Toward Better Choices,” Harvard Business Review, December, 99-105.
Gosling, Samuel D. and John A. Johnson (2010), Advanced methods for conducting online behavioral research. Washington, DC: American Psychological Association.
Johnson, Eric J., Steven Bellman, and Gerald L. Lohse (2002), “Defaults, Framing, and Privacy: Why Opting In Is Not Equal To Opting Out,” Marketing Letters, 13 (1), 5–15.
Johnson, Eric J. and Daniel G. Goldstein (2003), “Do Defaults Save Lives?” Science, 302, 1338-1339.
Johnson, Eric J., John Hershey, Jacqueline Meszaros, and Howard Kunreuther (1993), “Framing, Probability Distortions, and Insurance Decisions,” Journal of Risk and Uncertainty, 7, 35-53.
Madrian, Brigitte C. and Dennis F. Shea, D. F. (2001), “The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior,” Quarterly Journal of Economics, 116 (4), 1149-1187.
Thaler, Richard, Daniel Kahneman and Jack L. Knetsch (1992), “The Endowment Effect, Loss Aversion and Status Quo Bias,” in Richard Thaler, The Winner’s Curse, Princeton: Princeton University Press, 63-78.
Samuelson, William and Richard Zeckhauser (1988), “Status Quo Bias in Decision Making,” Journal of Risk and Uncertainty, 1 (1), 7-59.
Smith, N. Craig, Daniel G. Goldstein, and Eric J. Johnson (2010). Choice without Awareness: Ethical and Policy Implications of Defaults. Working paper.
Sunstein, Cass R. and Richard H. Thaler (2003), “Libertarian Paternalism Is Not an Oxymoron,” The University of Chicago Law Review, 70 (4), 1159-1202.

August 5, 2010

ACR 2010 Jacksonville uses green defaults

Filed in Conferences ,SJDM
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ASSOCIATION FOR CONSUMER RESEARCH CONFERENCE, OCT 7-10, 2010

What: The Association for Consumer Research Annual North American Conference [Website]
Where: Jacksonville, FL
Hotel: The Hyatt Regency [Map] [Booking]
When: OCT 7-10, 2010
Registration: Available now online
Early-bird deadline: Sept 1. Second price hike at Sept 25th.

ACR 2010 Jacksonville is open for registration!

Decision Science News notices that this year, the conference uses “green defaults”. Innovative! Check it out:

  • You will have the option to opt out of the complete program given at the conference. You can build your own program on the ACR website by going to www.acrweb.org/acr and signing in. Once there, choose the “program” option, and you will see the new tool which you can utilize. Print your customized program and bring it with you!
  • The default meal is vegetarian. You will have the option to opt out of the vegetarian meal.

Build-your-own-program is neat. We usually look at about half of the program, and end up needing about 20% of it at the conference. They have some other nudges as well:

  • You will have the option of buying carbon offsets for your flight.
  • You can choose the electronic version of the proceedings instead of a hardcover copy and receive a $20 discount.

The discount for the e-proceedings seems like a classic incentive. Decision Science News just registered and found that they used no default (forced choice) for this question. They could have made the default the green one and said “hardcover available for an extra $20″. In any case, we are glad to see research put to use.

March 10, 2009

Obama sends defaults to the rescue

Filed in Research News
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AUTOMATIC INDIVIDUAL RETIREMENT ACCOUNTS

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The New York Times has an interesting article called Savings Accounts for All: Simple but not Easy, which talks of the Obama administration’s plans to set up an automatic IRAs (Individual Retirement Accounts) for workers in the USA.

This is clearly policy in the behavioral economics / Nudge tradition, which is no surprise as Nudge author Cass Sunstein will be named head of the Office of Information and Regulatory Affairs in the present administration. The article even mentions research on the effects of autoenrollment, though it would have been nice had the NYT named the academics who carried out the research. Since the article does not, Decision Science News will give some citation love here:

  • Brigitte C Madrian & Dennis F Shea. (2001). The Power of Suggestion: Inertia in 401 (k) Participation and Savings Behavior. The Quarterly Journal of Economics, 116(4), 1149-1187.
  • Richard H. Thaler & Shlomo Benartzi (2004) Save More Tomorrow Using Behavioral Economics to Increase Employee Saving. Journal of Political Economy, 112 (1, pt. 2), S164-S187.

SIDENOTE
On a sidenote, the article mentions that in the proposed plan “There would be a standardized default investment, probably some kind of mutual fund with a mix of stocks and bonds that gets more conservative over time.” Since many outside of Finance do not know this, Decision Science News would like to direct its readers’ attention to the fact that there is not universal agreement among academics that portfolios should get more conservative with age. Some think one ought to pick the right asset allocation and stick with it throughout life. See this clearly-written article for a review.

RELATED POSTS
The daily defaults with power to change lives
Default effects of organ donation

Photo credit: Amazon.com

September 1, 2006

The daily defaults with power to change lives

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DEFAULTS DO MATTER

msgoo.jpg

Decision Science News and Eric Johnson have teamed up once again to write a piece for the Financial Times on the suprisingly powerful effect of defaults (even simple software defaults) on decisions, from the routine to the life-changing. Their conclusion? History gets written by default. The piece is called “The daily defaults that change lives” and you can read it here.

June 22, 2004

Do Defaults Save Lives?

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Eric Johnson and Dan Goldstein have published an investigation of the effect of policy defaults on organ donation in the journal Science [Download]. Defaults determine whether a citizen is in the organ donor pool unless they choose not to be (an “opt out” system, as in some European countries) or is not in the organ donor pool unless they choose to be (an “opt in” system as, in the United States). Looking at real-world data from a variety of European countries in addition to experimental data, it is found that most people stick with the default category they are assigned to.

Organ donation rates in Europe

Across European countries the opt out countries have drastically higher proportions of the population in the potential organ donor pool: a difference of 60 percentage points minimum.

Does the size of the donor pools matter? Johnson and Goldstein find that opt out countries are home to more organ transplantation, and presumably lives saved. This is supported by a regression analysis that controls for religion, educational level, and medical infrastructure.

January 3, 2014

Veggies by default

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PUTTING VEGGIES ON THE PLATE MEANS MANY GET THROWN AWAY

veg

We saw in our last posts that using double sided printing and cover sheets by default saves a lot of paper. This week we see a case in which defaults are effective, but have a costly drawback. Abstract says it all.

REFERENCE
Just, David &amp Joseph Price (2013). Default options, incentives and food choices: evidence from elementary-school children. PUBLIC HEALTH NUTRITION, 16 (12):2281-2288.

ABSTRACT
Objective: To examine whether requiring children to place fruits and vegetables on their lunch trays increases consumption of these items. Design: Observational study that exploited naturally occurring variation between two school districts and a pre-post observational study at schools that changed their lunch policy mid-year.

Setting: Fifteen elementary schools from two school districts, one requiring students to place a fruit or vegetable on their tray and one that does not. In addition, three schools that implemented a default option part way through the school year.

Subjects: Students at eighteen elementary schools (41,374 child-day observations) across the two experiments.

Results: Requiring that fruits and vegetables be placed on each child’s tray increased the fraction of children who ate a serving of fruits or vegetables by 8 percentage points (P < 0.01) but led to an extra 0.7 servings being thrown away per lunch served (P < 0.01). The default option approach cost $US 1.72 to get one additional child to eat one serving of fruits and vegetables for 1 d. However, when default options were combined with a small rewards programme the efficacy of both interventions increased.

Conclusions: A default option, as a stand-alone programme, had only a limited impact on fruit and vegetable consumption but was much less cost-effective than other approaches. Schools requiring children to take fruits and vegetables with their lunch might consider adopting additional interventions to ensure that the additional items served do not end up being thrown away.

December 16, 2013

Why does printing cover pages save paper?

Filed in Ideas
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MANY THEORIES

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One of the DSN editor’s cover sheets of staggering genius

Last week, we wrote about how setting printers to print double-sided by default saves paper. Kind of a no brainer. But we ended with a “counterintuitive coda” about how cover pages save paper. Counterintuitively, we were inundated with emails about the coda and none about the main finding. People wanted to know “How much paper did the cover sheets save?”, “Why does it work?” and so on.

HOW MUCH PAPER DOES IT SAVE?
According to a blurb by Microsoft IT “Our internal studies have shown that when banner pages are disabled, print volumes increase 15% to 17%”. That’s a big effect: That means you’re wasting a ream of paper every 6 reams you print. Interestingly, it’s quite close the paper savings associated with making double-sided printing the default (doubled sided: 15% decrease in paper consumption; cover pages:13-15% decrease).

WHY DOES IT SAVE PAPER?
Microsoft IT says it’s “because people end up picking up print jobs that don’t belong to them. When this occurs, missing print jobs are reprinted, which wastes time and money.”

While that sounds reasonable, we can imagine (with help from some comments from readers) some other reasons it might work. Here’s a running list of possibilities. Happy to add more if people think of them.

WHY COVER PAGES MIGHT SAVE PAPER

  • Without cover pages, people pick up print jobs that don’t belong to them, causing reprinting (as mentioned)
  • Without cover pages, orphaned print jobs left in the printer are thrown away instead of returned to their owners
  • With cover pages, the threat of public shaming gives people an incentive not to forget to pick up print jobs
  • With cover pages, the threat of public shaming makes people embarrassed about printing large jobs (or many jobs) in the first place
  • With cover pages, people are less likely to print one page when they realize that one cover sheet will be wasted by doing so

Note that the cover sheet is simply a default here, and can be switched off for any one job as desired.

All this talk of counterintuitive effects reminds us of a recent talk by a member of the UK’s Behavioral Insights Team (Nudge Unit). In the presentation, the member showed several versions of a form letter and asked the researchers in the room to guess which one had the biggest impact. The letter the researchers guessed would have the largest effect turned out to have one of the smallest impacts. Admittedly, the effect sizes were small, but it showed the importance of randomized experimentation and going beyond armchair theorizing in behavioral economics.

December 11, 2013

Duplex by default (and a counterintuitive coda)

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MEASURING THE BENEFITS OF CHANGING DEFAULT PRINTER SETTINGS

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Here’s a no-brainer application of benevolent defaults that has a provable, lasting change in paper consumption.

TITLE
Can Indifference Make the World Greener?

AUTHORS
Johan Egebark (Stockholm University) & Mathias Ekström (Norwegian School of Economics)

ABSTRACT
We test whether people’s tendency to stick with the default option can help save resources. In a natural field experiment we switch printers’ default settings, from simplex to duplex printing, at a large Swedish university. The results confirm that roughly one third of all printing is determined by the default alternative, and hence daily paper consumption drops by 15 percent due to the change. The effect is immediate, lasts throughout the experimental period, and remains intact after six months. We also investigate how the more conventional method of encouraging people to save resources performs, and find it has no impact. Recent theoretical and empirical contributions indicate that the default effect works through recommendation, depends positively on the number of alternatives in the choice set, and is reinforced for difficult decisions. We demonstrate that the default option matter in a simple, non-dynamic, decision task with only two alternatives, and where people have been explicitly informed about the recommended course of action.

 

COUNTERINTUITIVE CORNER
You would think turning off cover sheets on shared printers would reduce paper consumption. I mean, why waste a page every time you print? Well, Microsoft did an internal experiment. It turns out printing cover sheets actually reduced paper consumption. Boom. That’s why you’ve got to test your intuitions.

March 23, 2012

So. It has come to this.

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BEHAVIORAL ECONOMICS FOR DUMMIES

Behavioral Economics For Dummies. That is all.

Hat tip: http://xkcd.com/1022/

ADDENDUM: Just noticed it includes a section on default options and organ donation [also movie]. What an enlightened tome!

May 25, 2011

Heuristics: The foundations of adaptive behavior

Filed in Books ,Ideas ,Research News
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HOW DO PEOPLE MAKE DECISIONS WHEN TIME IS LIMITED, INFORMATION UNRELIABLE, AND THE FUTURE UNCERTAIN?

A new reader on heuristics, Heuristics: The Foundations of Adaptive Behavior, has just been released. Full disclosure, your Decision Science News editor is author on two of the book’s chapters:

CITATION:

Gigerenzer, G., Hertwig, R., & Pachur, T. (Eds.). (2011). Heuristics: The Foundations of Adaptive Behavior. New York: Oxford University Press.

 

PRECIS:

How do people make decisions when time is limited, information unreliable, and the future uncertain?

Based on the work of Nobel laureate Herbert Simon and with the help of colleagues around the world, the Adaptive Behavior and Cognition (ABC) Group at the Max Planck Institute for Human Development in Berlin has developed a research program on simple heuristics, also known as fast and frugal heuristics. In the social sciences, heuristics have been believed to be generally inferior to complex methods for inference, or even irrational.

Although this may be true in “small worlds” where everything is known for certain, we show that in the actual world in which we live, full of uncertainties and surprises, heuristics are indispensable and often more accurate than complex methods. Contrary to a deeply entrenched belief, complex problems do not necessitate complex computations. Less can be more.  Simple heuristics exploit the information structure of the environment, and thus embody ecological rather than logical rationality.

Simon (1999) applauded this new program as a “revolution in cognitive science, striking a great blow for sanity in the approach to human rationality.” By providing a fresh look at how the mind works as well as the nature of rationality, the simple heuristics program has stimulated a large body of research, led to fascinating applications in diverse fields from law to medicine to business to sports, and instigated controversial debates in psychology, philosophy, and economics.

In a single volume, the present reader compiles key articles that have been published in journals across many disciplines. These articles present theory, real-world applications, and a sample of the large number of existing experimental studies that provide evidence for people’s adaptive use of heuristics.

Review:
“This volume makes a powerful case for the importance of fast and frugal heuristics in explaining a wide range of aspects of cognition. It brings together the latest developments in one of the most influential research programs in the decision sciences, and will provide a valuable stimulus for, and a challenge to, research across the field.”
— Nick Chater, Professor of Cognitive and Decision Sciences, University College London

LINK
Amazon link to: Heuristics: The Foundations of Adaptive Behavior

TABLE OF CONTENTS

Appetizer

1. Homo heuristicus: Why Biased Minds Make Better Inferences.
Gerd Gigerenzer, and Henry Brighton

Part I: Theory

Opening the adaptive toolbox

2. Reasoning the Fast and Frugal Way: Models of Bounded Rationality.
Gerd Gigerenzer, and Daniel G. Goldstein

3. Models of Ecological Rationality: The Recognition Heuristic.
Daniel G. Goldstein and Gerd Gigerenzer

4. How Forgetting Aids Heuristic Inference.
Lael J. Schooler and R. Hertwig

5. Simple Heuristics and Rules of Thumb: Where Psychologists and Behavioral Biologists Might Meet.
John M.C. Hutchinson and Gerd Gigerenzer

6. Naive and Yet Enlightened: From Natural Frequencies to Fast and Frugal Decision Trees.
Laura Martignon, Oliver Vitouch, Masinori Takezawa, and Malcolm R. Forster

7. The Priority Heuristic: Making Choices without Trade-Offs.
Eduard Brandstätter, Gerd Gigerenzer, and Ralph Hertwig

8. One-Reason Decision making: Modeling Violations of Expected Utility Theory.
Konstantinos V. Katsikopoulos and Gerd Gigerenzer

9. The Similarity Heuristic.
Daniel Read and Yael Grushka-Cockayne

10. Hindsight Bias: A By-Product of Knowledge Updating?
Ulrich Hoffrage, Ralph Hertwig, and Gerd Gigerenzer

How are heuristics selected?

11. SSL: A Theory of How People Learn to Select Strategies.
Jörg Rieskamp and Philipp E. Otto

Part II: Tests

When do heuristics work?

12. Fast, Frugal, and Fit: Simple Heuristics for Paired Comparison.
Laura Martignon and Ulrich Hoffrage

13. Heuristic and Linear Models of Judgment: Matching Rules and Environments.
Robin M. Hogarth and Natalia Karelaia

14. Categorization with Limited Resources: A Family of Simple Heuristics.
Laura Martignon, Konstantinos V. Katsikopoulo, and Jan K. Woike

15. A Signal Detection Analysis of the Recognition Heuristic.
Timothy J. Pleskac

16. The Relative Success of Recognition-Based Iinference in Multichoice Decisions.
Rachel McCloy, C. Philip Beaman, and Philip T. Smith

When do people rely on one good reason?

17. The Quest for Take-the-Best.
Arndt Bröder

18. Empirical Tests of a Fast and Frugal Heuristic: Not Everyone “Takes-the-Best.”
Ben R. Newell, Nicola J. Weston, and David R. Shanks

19. A Response-Time Approach to Comparing Generalized Rational and Take-the-Best Models of Decision Making.
F. Bryan Bergert and Robert M. Nosofsky

20. Sequential Processing of Cues in Memory-Based Multi-Attribute Decisions.
Arndt Bröder and Wolfgang Gaissmaier

21. Does Imitation Benefit Cue-OrderLlearning?
Rocio Garcia-Retamero, Masanori Takezawa, and Gerd Gigerenzer

22. The Aging Decision Maker: Cognitive Aging and the Adaptive Selection of Decision Strategies.
Rui Mata, Lael J. Schooler, and Jörg Rieskamp

When do people rely on name recognition?

23. On the Psychology of the Recognition Heuristic: Retrieval Primacy as a Key Determinant of its Use.
Thorsten Pachur and Ralph Hertwig

24. The Recognition Heuristic in Memory-Based Inference: Is Recognition a Non-Compensatory Cue?
Thorsten Pachur, Arndt Bröder, and Julian N. Marewski

25. Why You Think Milan is Larger than Modena: Neural Correlates of the Recognition Heuristic.
Kirsten G. Volz, Lael J. Schooler, Ricarda I. Schubotz, Markus Raab, Gerd Gigerenzer, and D. Yves von Cramon

26. Fluency Heuristic: A Model of How the Mind Exploits a By-Product of Information Retrieval.
Ralph Hertwig, Stefan M. Herzog, Lael J. Schooler, and Torsten Reimer

27. The Use of Recognition in Group Decision Making.
Torsten Reimer and Konstantinos V. Katsikopoulos

Part III: Heuristics in the Wild

Crime

28. Psychological Models of Professional Decision Making.
Mandeep K. Dhami

29. Geographic Profiling: The Fast, Frugal, and Accurate Way.
Brent Snook, Paul J. Taylor, and Craig Bennel

30. Take-the-Best in Expert-Novice Decision Strategies for Residential Burglary.
Rocio Garcia-Retamero and Mandeep K. Dhami

Sports

31. Predicting Wimbledon Tennis Results 2005 by Mere Player Name Recognition.
Benjamin Scheibehenne and Arndt Bröder

32. Heuristics in Sports That Help Ws Win.
W.M. Bennis and Torsten Pachur

33. How Dogs Navigate to Catch Frisbees.
Dennis M. Shaffer, Scott M. Krauchunas, Marianna Eddy, and Michael K. McBeath

Investment

34. Optimal versus Naïve Diversification: How Inefficient is the 1/N Portfolio Strategy?
Victor DeMiguel, Lorenzo Garlappi, and Raman Uppal

35. Parental Investment: How an Equity Motive Can Produce Inequality.
Ralph Hertwig, Jennifer Nerissa Davis, and Frank J. Sulloway

36. Instant Customer Base analysis: Managerial Heuristics Often “Get It Right.”
Markus Wübben and Florian v. Wangenheim

Everyday things

37. Green Defaults: Information Presentation and Pro-Environmental Behavior.
Daniel Pichert and Konstantinois V. Katsikopoulos

38. “If …”: Satisficing Algorithms for Mapping Conditional Statements onto Social Domains.
Alejandro López-Rousseau and Timothy Ketelaar

39. Applying One-Reason Decision Making: The Prioritisation of Literature Searches
Michael D. Lee, Natasha Loughlin, and Ingrid B. Lundberg

40. Aggregate Age-at-Marriage Patterns from Individual Mate-Search Heuristics.
Peter M. Todd, Francesco C. Billari, and Jorge Simão