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Behavioural Economics

Was a privilege to talk at Harsh Mariwala’s Ascent + INK conclave, along with industry stalwarts like Harsh Mariwala, Chairman, Marico and Uday Kotak, Executive Vice Chairman, Kotak Mahindra Bank.

Topics included irrational behaviour of masses, doctors, air travellers, car drivers; inefficacy of campaigns like Swachh Bharat at changing behaviour; why our government and companies in India need to adopt behavioural design; public behaviour change; Bleep, People Power and how Nudge units are being implemented by governments around the world.

Comedian Cyrus Broacha interviews us on funny behaviours and Behavioural Design.

Cyrus’s nonsense makes a lot of sense.

Super witty and sharp Cyrus knows more about Behavioural Design than anyone who has interviewed us.

Behavioural solutions for road safety

This editorial article first appeared in Mint on 21st March, 2017

Making roads better should reduce the number of accidents. Yet that’s exactly the opposite of what’s happening in India. Despite measures being taken by the government on improving roads, there has been a continuous increase in road crash deaths since 2007, with a brief annual reduction in 2012. Between 2010 and 2015, incidence of road accidental deaths increased by an annual average rate of 1.2%. There were over 500,000 road accidents in 2015, up from 489,000 in 2014. More than 500,000 people were injured in road accidents in 2015, up from 493,000 in 2014. A total of 146,000 people died in road accidents in 2015, up from 139,000 in 2014. According to the National Crime Records Bureau, out of 146,000 deaths, only 0.8% of the cases were due to lack of road infrastructure.

Road safety is not just about creating infrastructure. It is about designing behavioural solutions that take human biases and irrational behaviour into consideration. When the roads are smooth, wide and empty, drivers are likely to speed. If the car being driven is big and tough, the driver feels much safer compared to driving say, a small hatchback. That makes drivers over-compensate and take undue risks. Regular speed limit signs are ineffective at getting drivers to slow down, because drivers don’t choose the speed based on speed limit signs. Rather, drivers simply go with the flow depending upon the width and smoothness of the road and traffic conditions.

To get drivers to reduce speeding, there have been several effective behavioural design nudges implemented around the world. At the curve of Chicago’s Lake Shore Drive and Oak Street, a series of horizontal white stripes have been painted on the road, that get progressively narrower as drivers approach the sharpest point of the curve, giving them the illusion of speeding up, and nudging them to tap their brakes.

According to an analysis conducted by the city’s traffic engineers, there were 36% fewer crashes in the six months after the lines were painted compared to the same six-month period the year before. Similar behavioural design nudges are now being applied in China and Israel to curb speeding.

In another trial in the UK conducted by Norfolk County Council, more than 200 trees were planted on the approach roads in north Norfolk which had a history of speeding problems. Results found that drivers reduced their speed by an average of 2 miles per hour. Again, as the car approached the village, the trees, planted closer and closer together, gave the impression that the vehicle was moving faster. This encouraged the motorists to slow down.

In another experiment in the US, the Virginia department of transportation painted zigzag white markings instead of the familiar straight dashed lines, to caution drivers approaching the road-crossing intersection used by pedestrians and bicyclists. They found that zigzag markings slowed average vehicle speeds and increased motorists’ awareness of pedestrians and cyclists. They also noted that the effects of the behavioural design didn’t wear off once motorists became used to it—they still slowed down a year after installation.

Building infrastructure like traffic signals doesn’t mean people will always follow them. But creating behavioural design nudges like displaying the seconds remaining for the traffic signal to turn green, is likely to reduce the number of people who break the signal. Such behavioural design takes into account that people are usually in a rush.

Rationally speaking, people shouldn’t be breaking signals because they wouldn’t be acting in their self-interest by putting themselves in harm’s way. But human behaviour is not rational. Drivers honk even when there is no way that honking could clear a traffic jam. Even when the signal is still red, there are drivers who honk. Therefore, rational ways of changing behaviour like educating people or creating awareness-based campaigns are ineffective. What’s effective at getting people to reduce honking is “bleep”—a red button on the dashboard of a car that beeps and flashes when the driver presses the horn. To switch off the red button, the driver has to press it. This behavioural design nudge breaks the habit of drivers’ honking because now each time drivers want to honk, “bleep” makes them deliberate whether they should honk or not. Bleep has been shown to reduce drivers honking by 61% in a six-month and 3,800km-long experiment in Mumbai.

Behavioural design needs to be applied at pedestrian crossings at traffic-signal junctions. At various traffic junctions, there are two signals in view—one signal placed just after the zebra crossing and the second signal on the other side of the junction once you’ve crossed it. That makes drivers keep inching forward, not stopping at the zebra crossing and thus not allowing pedestrians to cross. So to get cars to stop at the zebra crossing, only one traffic signal needs to be placed just before the zebra-crossing stripes begin, so that drivers have no option but to stop to get a view of the one and only traffic signal.

It’s time authorities stopped relying on ineffective money-draining campaigns, driver education and enforcement of laws. Instead, we should test simple, practical, scientific behavioural design nudges to improve road safety.

Behavioural Design & Road Safety

Our latest series of talks is how Behavioural Design can solve key road safety issues like accidents, speeding, honking, making pedestrian friendly traffic junctions, motorbike lanes and ensuring safety for all stakeholders. These talks are being done for Mercedes Benz. If we do get permissions we’ll try to upload the talks. Nevertheless we will write about the Behavioural Design nudges soon.

Part 5 of Behavioural Design interview with Hrishi K of 94.3 Radio One (last one in the series).

 

Part 4 of our Behavioural Design interview with Hrishi K of 94.3 Radio One.

 

Behavioural Design interview on Radio One 94.3 – Part 3

Behavioural Design interview on Radio One 94.3 – Part 2

Behavioural Design interview on Radio One 94.3 – Part 1

Emotions hugely affect decision-making

We’ve all experienced how we like to shop when we’re feeling down. While that says a lot about our buying behaviour, we never imagined that emotions played a huge role in our selling behaviour as well. This phenomenon is explained by an interesting study below.

Behavioural scientist Jennifer Lerner and her colleagues induced either sadness or no emotion in participants by having them view different film clips. Those assigned to the sadness-inducing condition watched a movie clip from The Champ, which featured the death of a boy’s mentor; following that, they were asked to write a brief paragraph about how they’d feel if they’d been in the situation themselves. Those in the no-emotion condition watched an emotionally neutral film clip featuring fish and then wrote about their day-to-day activities. Afterward, half the participants were asked to set a price to sell some highlighters and the other half were asked to set a price to buy the same highlighters.

Turned out that sad buyers were willing to purchase the item for around 30% more than emotionally neutral buyers. Here’s the interesting part. Sad sellers were willing to part with the item for around 33% less than emotionally neutral sellers! Researchers also found that the participants had no idea that they had been so deeply affected by the residual feelings of sadness.

Behavioural scientists Christopher Hsee and Yuval Rottenstrich argue further that in emotionally charged situations we become less sensitive to the magnitude of numbers – we are more likely to pay attention to the simple presence or absence of an event. We get persuaded by offers when we shouldn’t be. Like when we’re got our eyes set on a new beauty (car) and if the difference between the price of the car and what we’re willing to pay for it is say Rs. 3 lakh – a good salesperson will manage to persuade us by throwing in one or two additional items free like a mirror lock or steering lock, whose value is realistically nowhere near Rs. 3 lakhs.

Lesson for negotiations, buying and selling decisions – examine how you feel and put off the decision until you’re feeling emotionally neutral.

Source: Lerner, A. Small and G. Lowenstein – Heart strings and purse strings: carryover effects of emotions on economic decisions – Psychological Science, 15:337-41 (2004)

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