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Understanding the Principles of Behavioral Design

Let’s put things on the table, we are all mind designers.

Key points

  • Our decisions are driven by emotion, so different framing will lead to different results.
  • Understanding human biases allows us to pull the strings gently, and each pull will result in different behavior.
  • The idea of behavioral economics is that you can influence, save more for retirement, or spend less energy through small nudges.

Let's try to understand this field called behavioral design or, in other words–the architecture of choice.

Lately, there has been quite a bit of buzz around the subject of "behavioral design" and against all those who deal with the subject, including the author of this column. The vaccine opponents accused me in Israel of helping the Israeli government convince citizens to get vaccinated against their will, using manipulations based on behavioral economics, and playing with peoples’ minds.

But the truth is that we are all "mind designers." The very fact that you make sure that there is a tray of cut vegetables in the refrigerator to hide the chocolate cake so that you are not tempted–you are engaged in shaping behavior. Even when you decide to close the chip bag with a chip clip and not just roll the opening of the closed bag, you are a designer of consciousness. Studies show that when it is more difficult for us to open the bag, the chance of being tempted to eat from it will decrease.

Understanding Behavioral Design

Let's try to understand deeply this field called behavioral design or, in other words, the architecture of choice. Imagine that you decided to see a movie and bought a ticket for $15. You arrive at the ticket office and discover that you have forgotten your ticket. Will you pay another $15 for a new ticket?

Now, let’s try another question: You decided to see a movie but didn't buy a ticket in advance. When you get to the checkout, you discover that you lost the $15 cash in your wallet. Will you still buy a ticket with a credit card?

In both cases, it is the same financial loss, but in the first case, the mental calculation or mental accounting results in a strong feeling of frustration–as if we have paid double for the ticket. On the other hand, in the second case, the $15 you planned to spend on the movie is allegedly not related to the $15 in their wallets, so most people will still buy a ticket to the movie in the second scenario but not in the first one.

It’s called framing–the exact same problem will trigger completely different feelings in a different framing of things. Framing the problem as in the first option leads to a terrible feeling of frustration. On the other hand, the loss of those $15 in the second option might bother us much less. Our decisions are driven by emotion, so the different framing will lead to completely different results for the simple reason it evokes a different emotion in us.

Information Processing Is Full of Cognitive Biases

These examples illustrate the new understandings we have formulated about human behavior, the understandings included in the discipline of behavioral economics founded by Amos Tversky and Daniel Kahneman. They proved to the world that the information process is full of cognitive biases.

But how can humans predict their behavior if they do not obey rational laws? Here comes the great discovery of Tversky and Kahneman: they have shown that while human beings do not follow pure economic logic, the deviations from the economic model are not random but predictable.

Alongside Kahneman and Tversky was Professor Richard Thaler of the University of Chicago, who provided a wonderful explanation for the ticket issue for the film. He called the process "mental accounting." He said we treat the same amount of money from different sources differently. For example, if you won the lottery, your attitude to money will be different than if you worked washing floors to earn it. Thaler was the one who coined the term "nudge"–an almost imperceptible intervention aimed at changing the way people make decisions and behave.

Can You Change Others' Behavior?

How can you push people to a decision without changing the rewards offered? Very simple. Change the way the reward is displayed. Thaler noticed that refuelers are willing to pay a little more for a credit payment, but when the extra payment is presented as a fee, people are suddenly unwilling to pay it. Understanding human biases allows us to gently pull the strings, and each pull will result in different behavior.

That’s how you can shape your behavior without effort. This is the purpose of nudge. For example, one of the global hotel chains tried to encourage its guests to reuse towels to save money on towel sterilization, but any attempts to talk to the guests into this failed.

As it turns out, one of the greatest moments of joy for people who come to a hotel is to use a towel one time and throw it away for a new clean towel. Appealing to people’s conscience and asking them to “save the environment”–was not found to be particularly effective. The solution was a change in the way the incentives were presented. When the message was, "75 percent of guests reuse towels," the response rate rose to 44 percent. And when it said, "75 percent of guests who stay in this room reuse towels,"–the response rate rose to 49 percent.

We were able to evoke a sense of belonging, a social proof–the need to feel a part of the group. In this case, the guests did not want to violate the room's reputation, even though they had no idea who the other guests were.

Recognizing What Motivates Us to Make Decisions

Now, it might come as a surprise to you, but it turns out that financial incentive is not necessarily more effective than social comparison. Sometimes a fine even does the opposite, as in the following case: You are probably aware that one of the biggest problems for kindergarteners is parents who are late picking up their children from kindergarten.

Professor Uri Genizi examined whether a fine is an effective deterrent to behavioral change, but the result was the opposite–in kindergartens where a fine was imposed on parents, the number of delays jumped compared to kindergartens where no fee was imposed. This study illustrates the elusive power of incentives: in the case of the kindergarten parents, imposing a fee turned the “being late” behavior from misbehavior into a matter of price.

Another bias inherent in us is loss aversion. People want more of the things that are in short supply or at risk of running out. When trying to convince people to get vaccinated, the message that worked best is, "Your vaccine dose will be kept for you for a week." This post worked better than all the other posts, as it evoked a sense of ownership and loss aversion.

The additional reminder made the participants feel that the vaccine dose already belonged to them, and if they did not get vaccinated–they would lose. It created a need to maintain reciprocity by making participants feel that someone had already made an effort to keep the vaccine dose for them and that it would be good to come and get vaccinated.

The idea of behavioral economics is that through small "nudges," you can influence, save more for retirement, spend less energy or save the environment.

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