I’ve noticed a lot of musings about behavioural economics over the past few months (to the point that Wendy’s currently taking a class on it at Columbia). A lot of it has been related Richard Thaler‘s recent book Nudge, plus the fact that he frequently consults Austin Goolbee, one of Obama’s top economic advisers.
One of the other big players in this space is Daniel Ariely, who also has a book – Predictably Irrational. Both have recently-ish done book tour at Google. Here’s the video from Daniel’s visit; it’s a great intro to the topic (plus he’s an entertaining speaker):
If you only watch 3 minutes of this, skip ahead to 27:50 and watch as he recounts an offer The Economist had online (he took a screenshot). They offered the following subscription options:
- Online-only access: $59
- Print-only: $125
- Print plus online access: $125
You’re probably thinking: “these people are idiots – why would anyone pay $125 for just print when they could get online for free?” And you’re right – Ariely asked 100 MIT students which offer they’d take and the split was 16/84 online vs. print + online. No one took the print-only offer.
Nothing exciting there, so he re-ran the experiment without the print-only option. Now it was a whole new world: 68 students wanted online-only access whereas only 32 wanted print plus online.
Now The Economist doesn’t look so stupid anymore. As Ariely describes it: “the middle option was useless in the sense that nobody wanted it, but it wasn’t useless in the sense that it helped people figure out what they wanted.”
Check out the video and read up on the topic. This is a nascent field tackling a lot of tough questions and it’ll be interesting to see if someone can come up with a comprehensive theory over the next few years.