Hostname: page-component-55f67697df-jr75m Total loading time: 0 Render date: 2025-05-12T02:10:10.278Z Has data issue: false hasContentIssue false
  • English
  • Français

Behavioural economics, consumer behaviour and consumer policy: state of the art

Published online by Cambridge University Press:  06 October 2017

LUCIA A. REISCH  and
MIN ZHAO
LUCIA A. REISCH*
Affiliation:
Copenhagen Business School, Porcelaenshaven 18a, DK-2000 Frederiksberg, Denmark
MIN ZHAO
Affiliation:
Carroll School of Management, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA
*
*Correspondence to: Copenhagen Business School, Porcelaenshaven 18a, DK-2000 Frederiksberg, Denmark. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Counter to the traditional assumption of neoclassical economics that individuals are rational Homo oeconomici that always seek to maximize their utility and follow their ‘true’ preferences, research in behavioural economics has demonstrated that people's judgements and decisions are often subject to systematic biases and heuristics, and are strongly dependent on the context of the decision. In this article, we briefly review the transition of research from neoclassical economics to behavioural economics, and discuss how the latter has influenced research in consumer behaviour and consumer policy. In particular, we discuss the impacts of key principles such as status quo bias, the endowment effect, mental accounting and the sunk-cost effect, other heuristics and biases related to availability, salience, the anchoring effect and simplicity rules, as well as the effects of other supposedly irrelevant factors such as music, temperature and physical markers on consumers’ decisions. These principles not only add significantly to research on consumer behaviour – they also offer readily available practical implications for consumer policy to nudge behaviour in beneficial directions in consumption domains including financial decision making, product choice, healthy eating and sustainable consumption.

Type
Articles
Information
Behavioural Public Policy , Volume 1 , Issue 2 , November 2017 , pp. 190 - 206
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Aggarwal, P. P. and Zhao, M. (2015), ‘Seeing the big picture: Effect of height on the level of construal’, Journal of Marketing Research, 52(1): 120–133.Google Scholar
Alba, J. W. and Chattopadhyay, A. (1986), ‘Salience effects in brand recall’, Journal of Marketing Research, 23: 363–369.Google Scholar
Ariely, D. (2008), Predictably irrational, New York: HarperCollins.Google Scholar
Ariely, D., Lowenstein, G. and Prelec, D. (2003), ‘Coherent arbitrariness: Stable demand curves without stable preferences’, Quarterly Journal of Economics, 118: 73–106.Google Scholar
Arkes, H. R. and Ayton, P. (1999), ‘The sunk cost and Concorde effects: Are humans less rational than lower animals?’ Psychological Bulletin, 125: 591–600.CrossRefGoogle Scholar
Bar-Hillel, M. and Neter, E. (1996), ‘Why are people reluctant to exchange lottery tickets?’ Journal of Personality and Social Psychology, 70(1): 17–27.Google Scholar
Bartels, D. and Sussman, A. (2016), ‘Anchors, target values, and credit card payments’, Working paper. University of Chicago.Google Scholar
Behavioural Insights Team (2015), Update report, 2013–2015. London: BIT. Retrieved from: http://www.behaviouralinsights.co.uk/wp-content/uploads/2015/07/BIT_Update-Report-Final-2013-2015.pdf (20.07.2015).Google Scholar
Brasel, S. A. and Gips, J. (2014), ‘Tablets, touchscreens, and touchpads: How varying touch interfaces trigger psychological ownership and endowment’, Journal of Consumer Psychology, 24(2): 226–233.Google Scholar
Brennan, L., Binney, W., Parker, L., Aleti, T. and Nguyen, D. (2014), ‘Rational economic models (cognitive models)’, in Brennan, L., Binney, W., Parker, L., Aleti, T., and Nguyen, Dang (eds), Social marketing and behaviour change: Models, theory and applications, Cheltenham, UK: Edward Elgar, 17–37.CrossRefGoogle Scholar
Bruns, H., Kantorowicz-Reznichenko, E., Klement, K., Luistro Jonsson, M. and Rahali, B. (2016), Can nudges be transparent and yet effective? WiSo-HH Working Paper Series, Working Paper No. 33. Available at SSRN: https://ssrn.com/abstract=2816227.Google Scholar
Bruyn, A. and Prokopec, S. (2013), ‘Opening a donor's wallet: The influence of appeal scales on likelihood and magnitude of donation’, Journal of Consumer Psychology, 23(4): 496–502.Google Scholar
Bucher, T., Collins, C., Rollo, M. E., McCaffrey, T. A., De Vlieger, N., Van der Bend, D., Truby, H. and Perez-Cueto, F. J. (2016), ‘Nudging consumers towards healthier choices: A systematic review of positional influences on food choice’, British Journal of Nutrition, 115(12): 2252–2263. doi: 10.1017/S0007114516001653.CrossRefGoogle ScholarPubMed
Camerer, C. F. and Loewenstein, G. F. (2004), ‘Behavioral economics: Past, present, future’, in Camerer, C., Loewenstein, G. F., and Rabin, M. (eds), Advances in Behavioral Economics, Princeton, MA: Sage, 3–51.CrossRefGoogle Scholar
Carroll, G. D., Choi, J. J., Laibson, D. I., Madrian, B. and Metrick, A. (2009), ‘Optimal defaults and active decisions’, Quarterly Journal of Economics, 124(4): 1639–1674.Google Scholar
Carroll, L. S., White, M. P. and Pahl, S. (2011), ‘The impact of excess choice on deferment of decisions to volunteer’, Judgment and Decision Making, 6(7): 629–637.Google Scholar
Castelo, N., Hardy, E., House, J., Mazar, N., Tsai, C., and Zhao, M. (2015), ‘Moving citizens online: Salience and framing as motivators for behavioral change’, Journal of Behavioral Science and Policy, 1(2): 57–68.Google Scholar
Chae, B. and Zhu, R. (2014), ‘Environmental disorder leads to self-regulatory failure’, Journal of Consumer Research, 40(6): 1203–1218.Google Scholar
Custers, R. and Aarts, H. (2010), ‘The unconscious will: How the pursuit of goals operates outside of conscious awareness’, Science, 329(5987): 47–50.CrossRefGoogle ScholarPubMed
Fiske, S. T. and Taylor, S. E. (1991), Social cognition, New York: McGraw-Hill.Google Scholar
Gourville, J. and Soman, D. (2002), ‘Pricing and the psychology of consumption’, Harvard Business Review, 80(9): 90–96.Google Scholar
Haggag, K. and Paci, G. (2014), ‘Default tips’, American Economic Journal: Applied Economics, 6(3): 1–19.Google Scholar
Halpern, D. (2015), Inside the nudge unit. How small changes can make big differences, London: Ebury Publ.Google Scholar
Hong, J. and Sun, Y. (2012), ‘Warm it up with love: The effect of physical coldness on liking of romance movies’, Journal of Consumer Research, 39(2): 293–306.Google Scholar
Huang, X. I., Zhang, M., Hui, M. K. and Wyer, R. S. (2014), ‘Warmth and conformity: The effects of ambient temperature on product preferences and financial decisions’, Journal of Consumer Psychology, 24(2): 241–250.CrossRefGoogle Scholar
Jachimowicz, J. M., Menges, J. I. and Galinsky, A. D. (2016), ‘Weather affects voting decisions’, Working paper. https://ssrn.com/abstract=2868054orhttp://dx.doi.org/10.2139/ssrn.2868054.Google Scholar
Johnson, E. J. and Goldstein, D. G. (2003), ‘Do defaults save lives?’ Science, 302(5649): 1338–1339.Google Scholar
Kahneman, D. (2003), ‘Maps of bounded rationality: Psychology for behavioral economics’, The American Economic Review, 93: 1449–1475.CrossRefGoogle Scholar
Kahneman, D. (2011), Thinking, fast and slow, New York: Farrar, Strauss and Giroux.Google Scholar
Kahneman, D., Knetsch, J. and Thaler, R. (1991), ‘Anomalies: The endowment effect, loss aversion, and status quo bias’, Journal of Economic Perspectives, 5(1): 193–206.Google Scholar
Kahneman, D. and Tversky, A. (1979), ‘Prospect theory: An analysis of decision under risk’, Econometrica, 47: 263–291.CrossRefGoogle Scholar
Lehner, M., Mont, O. and Heiskanen, E. (2016), ‘Nudging – A promising tool for sustainable consumption behaviour?’ Journal of Cleaner Production, 134(Part A): 166–177.Google Scholar
Lewin, K. (1951), ‘Field theory in social science’, in Cartwright, D. (ed.), Selected Theoretical Papers, New York: Harper and Row.Google Scholar
Loewenstein, G., Bryce, C., Hagmann, D. and Rajpal, S. (2015), ‘Warning: You are about to be nudged’, Behavioral Science and Policy, 1(1): 35–42.CrossRefGoogle Scholar
Lunn, P. (2014), Regulatory policy and behavioural economics, Paris: OECD Publishing.Google Scholar
Luth, H. A. (2010), Behavioural economics in consumer policy: The economic analysis of standard terms in consumer contracts revisited, Antwerp: Intersentia.Google Scholar
Ly, K., Mažar, N., Zhao, M. and Soman, D. (2013), ‘A practitioner's guide to nudging’, Research Report Series, Rotman School of Management Report, University of Toronto.Google Scholar
Maddux, W. W., Yang, H., Falk, C., Adam, H., Adair, W., Endo, Y., Carmon, Z. and Heine, S. J. (2010), ‘For whom is parting with possessions more painful? Cultural differences in the endowment effect’, Psychological Science, 21(12): 1910–1917.Google Scholar
Maeng, A., Tanner, R. J. and Soman, D. (2013), ‘Conservative when crowded: Social crowding and consumer choice’, Journal of Marketing Research, 50(6): 739–752.Google Scholar
Menon, G. and Raghubir, P. (2003), ‘Ease of retrieval as an automatic input in judgments: A mere-accessibility framework?’ Journal of Consumer Research, 30: 230–243.Google Scholar
Mick, D. G., Broniarczyk, S. M. and Haidt, J. (2004), ‘Choose, choose, choose, choose, choose, choose, choose, choose: Emerging and prospective research on the deleterious effects of living in consumer hyperchoice’, Journal of Business Ethics, 52: 207–211.CrossRefGoogle Scholar
Morrin, M., Inman, J., Broniarczyk, S., Nenkov, G. and Reuter, J. (2012), ‘Investing for retirement: The moderating effect of fund assortment size on the 1/N heuristic’, Journal of Marketing Research, 49(4): 537–550.Google Scholar
Mullainathan, S. and Shafir, E. (2009), ‘Savings policy and decision-making in low-income households’, in Barr, M. and Blank, R. (eds), Insufficient funds: Savings, assets, credit and banking among low-income households, New York: Russell Sage Foundation Press, 121–145.Google Scholar
Mullainathan, S. and Shafir, E. (2013), Scarcity: Why having too little means so much, New York: Time Books/Henry Holt.Google Scholar
Nikolova, G. and Inman, J. (2015), ‘Healthy choice: The effect of simplified point-of-sale nutritional information on consumer food choice behavior’, Journal of Marketing Research, 52(6): 817–835.CrossRefGoogle Scholar
Nikolova, H., Lamberton, C. and Haws, K. L. (2016), ‘Haunts or helps from the past: Understanding the effect of recall on current self-control’, Journal of Consumer Psychology, 2(26): 245–256.Google Scholar
North, A. C., Hargreaves, D. J. and McKendrick, J. (1999), ‘The influence of in-store music on wine selections’, Journal of Applied Psychology, 84(2): 271–276.CrossRefGoogle Scholar
OECD (2010), Consumer policy toolkit, Paris: Organisation for Economic Co-operation and Development (OECD) Publishing.Google Scholar
OECD (2017a), Behavioural insights and public policy. Lessons from around the world, Paris: Organisation for Economic Co-operation and Development (OECD) Publishing.Google Scholar
OECD (2017b), Tackling environmental problems with the help of behavioural insights, Paris: Organisation for Economic Co-operation and Development (OECD) Publishing.Google Scholar
Oehler, A. and Wendt, S. (2017), ‘Good consumer information: The Information Paradigm at its (dead) end?’ Journal of Consumer Policy, 40: 179–191.CrossRefGoogle Scholar
Oliver, A. (2017), The origins of behavioural public policy, Cambridge: Cambridge University Press.Google Scholar
Prelec, D. and Loewenstein, G. (1998), ‘The red and the black: Mental accounting of savings and debt’, Marketing Science, 17(1): 4–28.CrossRefGoogle Scholar
Reisch, L. A. and Sunstein, C. R. (2015), ‘Behavioural economics and consumption’, in Cook, D. T. and Ryan, J. M. (eds). The Wiley Blackwell encyclopaedia of consumption and consumer studies, Hoboken, NJ: Wiley-Blackwell, 41–42.Google Scholar
Reisch, L. A. and Sunstein, C. R. (2016), ‘Do Europeans like nudges?’, Judgment and Decision Making, 1(4): 310–325.CrossRefGoogle Scholar
Reisch, L. A. and Thøgersen, J. B. (2017), ‘Behaviourally informed consumer policy: Research and policy for “humans”’, in Keller, M., Halkier, B., Wilska, T.-A. and Truninger, M. (eds), Routledge handbook on consumption, London: Routledge, 242–253.Google Scholar
Ross, L. and Nisbett, R. E. (1991), The person and the situation: Perspectives of social psychology, London: McGraw-Hill.Google Scholar
Salisbury, L. C. (2014), ‘Minimum payment warnings and information disclosure effects on consumer debt repayment decisions’, Journal of Public Policy and Marketing, 33(1): 49–64.CrossRefGoogle Scholar
Shah, A., Bettman, J., Ubel, P., Keller, P.A. and Edell, J. (2014), ‘Surcharges plus unhealthy labels reduce demand for unhealthy menu items’, Journal of Marketing Research, 51(6): 773–789.Google Scholar
Shah, A., Eisenkraft, N., Bettman, J. R. and Chartrand, T. L. (2016), ‘“Paper or plastic?”: How we pay influences post-transaction connection’, Journal of Consumer Research, 42(5): 688–708.Google Scholar
Simon, H. (1956), ‘Rational choice and the structure of the environment’, Psychological Review, 63: 129–138.Google Scholar
Soman, D. (2001), ‘The mental accounting of sunk time costs: Why time is not like money’, Journal of Behavioral Decision Making, 14: 169–185.Google Scholar
Soman, D. and Gourville, J. (2001), ‘Transaction decoupling: How price bundling affects the decision to consume’, Journal of Marketing Research, 38: 30–44.Google Scholar
Soman, D. and Zhao, M. (2011), ‘The fewer the better: Number of goals and savings behavior’, Journal of Marketing Research, 48(6): 944–957.Google Scholar
Sousa Lourenço, J., Ciriolo, E., Rafael Rodrigues Vieira de Almeida, S. and Troussard, X. (2016), Behavioural insights applied to policy, European Report, 2016, Joint Research Centre (JRC) Report EUR 27726 EN. Brussels: JRC.Google Scholar
Steffel, M., Williams, E. F. and Podacar, R. (2016), ‘Ethically deployed defaults: Transparence and consumer protection through disclosure and preference articulation’, Journal of Marketing Research, DOI: 10.1509/jmr.14.0421.Google Scholar
Stewart, N. (2009), ‘The cost of anchoring on credit-card minimum repayments’, Psychological Science, 20(1): 39–41.Google Scholar
Sunstein, C. R. (2011), ‘Empirically informed regulation’, The University of Chicago Law Review, 78(4): 1349–1429.Google Scholar
Sunstein, C. R. (2014). Why nudge? The politics of libertarian paternalism, New Haven, CT: Yale University Press.Google Scholar
Sunstein, C. R. (2016a), ‘The council of psychological advisers’, Annual Review of Psychology, 67: 713–737.CrossRefGoogle ScholarPubMed
Sunstein, C. R. (2016b), The ethics of influence: Government in the age of behavioural science, New York: Cambridge University Press.Google Scholar
Sunstein, C. R. (2016c), ‘Fifty shades of manipulation’, Journal of Marketing Behavior, 1(3–4): 213–244.Google Scholar
Sunstein, C. R. (2016d), ‘People prefer system 2 nudges (kind of)’, Duke Law Journal, 66: 121.Google Scholar
Sunstein, C. R. and Reisch, L. A. (2017), ‘Introduction: The economics of nudge’, in Sunstein, C. R. and Reisch, L. A. (eds), The economics of nudge, 4 Volumes. Routledge Series “Critical Concepts in Economics”, New York, NY: Routledge, 1–12.Google Scholar
Sunstein, C. R., Reisch, L. A. and Rauber, J. (2017), ‘A world-wide consensus on nudging? Not quite, but almost’, Regulation and Governance (in press).Google Scholar
Thaler, R. H. (1980), ‘Toward a positive theory of consumer choice’, Journal of Economic Behavior and Organization, 1: 39–60.Google Scholar
Thaler, R. H. (1985), ‘Mental accounting and consumer choice’, Marketing Science, 4(3): 199–214.Google Scholar
Thaler, R. H. (2015), Misbehaving: The making of behavioural economics, New York, NY: Norton.Google Scholar
Thaler, R. H. and Sunstein, C. R. (2008), Nudge: Improving decisions about health, wealth, and happiness, New Haven, CT: Yale University Press.Google Scholar
Tversky, A. and Kahneman, D. (1974), ‘Judgment under uncertainty: Heuristics and biases’, Science, 185(4157): 1124–1131.Google Scholar
Whitehead, M., Jones, R., Howell, R., Lilley, R. and Pykett, J. (2014), Nudging all over the world. Swindon/Edinburgh: ESRC Report.Google Scholar
World Bank (2014), Mind, society, and behavior. World Development Report, 2015. Washington, DC: The World Bank Group.Google Scholar
Zhao, M., Hoeffler, S. and Dahl, D. W. (2012a), ‘Imagination difficulty and new product evaluation’, Journal of Product Innovation Management, 29(1): 76–90.Google Scholar
Zhao, M., Lee, L. and Soman, D. (2012b), ‘Crossing the virtual boundary: The effect of task-irrelevant environmental cues on task implementation’, Psychological Science, 23(10): 1200–1207.Google Scholar
Zwebner, Y., Lee, L. and Goldenberg, J. (2014), ‘The temperature premium: Warm temperatures increase product valuation’, Journal of Consumer Psychology, 24(2): 251–259.Google Scholar