Sugar-Coated Sleight of Hand

Phony outrage broke out in the office this morning when we learned that some snack manufacturers had achieved the feat of producing lower-calorie candy bars by simply reducing their size. The smaller bars contain the same proportion of sugar and fat as their high-calorie counterparts – and cost the same price – but there is simply less of it in the package.  At first glance, it seems like another example of marketing sleight of hand. From a behavioural economics perspective, however, the candy-makers may actually be doing consumers a favour. Continue reading

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The Auto-Enrolment ‘Nudge’

A discussion about the desirability of nudging techniques became very heated at a recent investor seminar on behavioural finance. Policymakers ‘nudge’ when they encourage people to make particular choices by employing techniques drawn from behavioural psychology. For instance, changing the default status in the company pension scheme for new employees from out-unless-opted-in to in-unless-opted-out tends to increase the participation rate. Indeed, this was precisely the issue that stirred delegates’ emotions. Continue reading

The Punishment Swap

My nine-year old has been particularly disobedient lately. Her behavior was so unacceptable last week I threatened not to take her to her best friend’s birthday party, planned for last weekend, if she did not mend her ways. Well, the threat went unheeded; she proceeded almost immediately to do the thing that she had been told not to do. So I declared that she would forfeit the birthday party. She became instantly gloomy and remorseful, but seemed to accept the punishment until, that is, the day before the birthday party. Only then did she realize the full weight of the loss. Continue reading