The Power of Choice Architecture Two Australian …...The Power of Choice Architecture Two...
Transcript of The Power of Choice Architecture Two Australian …...The Power of Choice Architecture Two...
The Power of Choice ArchitectureTwo Australian Examples
Professor Uwe DulleckQueensland Behavioural Economics group (QuBE)QUT Business School
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QuBE
Introduction to QuBE:
The Queensland Behavioural EconomicsGroup(QuBE) is a platform to bring together researchers from Economics, Finance and Behavioural Sciences to push the frontiers in theoretical and applied Behavioural Economics research. The group strives to evaluate, inform and design decisions and institutions in business, politics and society.
Trimbach(Tax office)
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QuBE
QuBE Projects/SpecializationsChoice Architecture: Development, Design and Evaluation
– Education: • A school attendance/performance program for indigenous
Australians;• Early Start Kindergarten in Victoria; • Program uptake in a healthy lifestyle program for children in Queensland; • Peer Effects in Academic Achievement and Food Choices in Classrooms;• Relative Age Effects of School Children;• Education – Crime, an application of Big Data.
– Financial Markets:• Compliance: Taxation and Directors of Companies in Liquidation• Financial Decision Making: Investments in Hybrid Securities and
Decision Making of older Australians.• Financial Regulation: Bankruptcy Law
– s
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FOGS-ARTIE: Role Models and Rewards
The FOGS-ARTIE program(Achieving Results Through Indigenous Education)
Dulleck et al. (2014) shows that the Former Origin Greats program to increase attendance and performance of indigenous Australians at school has a positive impact.
The standard ARTIE program uses role models and low powered (ex-post) rewards to increase attendance and performance of indigenous Australians at school.
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FOGS-ARTIE Program• FOGS schools improved more than control schools!
QuBE
Rewarding Ex-ante Promises: FoGS-ARTIE 2015
• In 2015, we studied whether rewarding – ex ante - the promise to “attend school more than 90% of school days” more or less effective than ex-post rewards.
January MarchFebruary April May June July
Term 1 (Jan end – April beginning) Term 2 – (April end to June end)Term break
Advertisement of Term 1 challenges
School launches for the Term 1 challenges
Advertisement of Term 2 challenges
School launches for the Term 2
challenges
Term 1 Rewards: Watch and football jumperTerm 1 Challenge Target: 90% attendance
Term 2 Rewards: Bag and beanieTerm 2 Challenge Target: 90% attendance and a minimum B in effort and behaviour for Maths and English
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Preliminary Results: Indigenous student absence rate
By gender and challenge (2015): Unexplained absence rates
By year and challenge (2014 all schools used ex-post standard rewards): Unexplained absence rates
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QuBE
Summary
• Behavioural Economics offers new ways to think about, design and evaluate targeted programs in the education sector.
• QuBE research provides evidence that the FoGS ARTIE academy program using targeted incentives and role models can positively affect school attendance and performance of indigenous children.
• QuBE then co-developed with the FoGS a Nudge to reward (ex-ante) promises of high attendance and performance, and was able to show that this can be an even more powerful motivator (results preliminary).
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Investment in Hybrid SecuritiesASIC report 427 (Basu et al., 2015)
ASIC asked QuBE researchers whether the names of companies issuing of Hybrid securities lead retail investors to see these investments as safer than they are. This seems not to be the case, if the information is simple and standardized.
• Evaluation of whether names/brands ofcorporation “bias” decision making.
• Identification of Cognitive Biases that may affect investment decisions in Hybrid securities.
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Hybrid Securities – Lab Experiments
• Portfolio choices (changing names, returns and risk characteristics), risk assessments, testing for biases.
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Laboratory Experiments
The “Name” does not affect investment decisions (the usual disclaimer re. the participant pool applies).
Participants understand the underlying risks of different investment options.
… but this is for highly standardized presentation of information.
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Summary
• Behavioural Economics offers tools, here Laboratory Experiments, to provide relative fast feedback on whether cognitive biases affect investment decision making (testing for unintended(?) consequences of choice architecture).
• The QuBE-ASIC report indicates that if information is presented in a simple and standardized form, investment decisions seem to be unbiased. More (field) evidence is needed!
• Illusion of Control, Framing and Overconfidence are biases that are correlated with higher investments in Hybrid Securities.
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Hybrid Securities – Lab I• Prevalence of Behavioural Biases (based on Pompian, 2012)
60.5% 39.5%Bias
No Bias
Illusion of Control
Representativeness
No BiasBias
51%
49%
Base rate neglect
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Hybrid Securities – Lab II• Effects of Biases on Investment Choice: Illusion of Control (affecting
investments in Hybrids) and Base Rate neglect (not affecting investments)
Representativeness Bias or Base Rate neglect
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Illusion of Control