Tag Archives: Choice architecture

Cases

Why a vending machine boosts donations: Insights from behavioral economics

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At the Ala Moana Shopping Center in Hawaii, a vending machine encourages donations. I do not know who designed this Giving Machine, but I am certain it is inspired by scientifically tested ideas in psychology and behavioral economics.

Before elaborating on three specific reasons, the key to its effectiveness lines in the vending machine itself. Unlike traditional charity appeals that vaguely describe where money goes, this machine allows donors see their choices clearly. The message on the machine also states: “100% of your donation goes to the charity cause of your choice.” This transparency reduces uncertainty.

However, visual clarity is just the beginning. Beyond visibility, three behavioral economics insights make this machine highly persuasive.

First, it offers multiple options, leveraging the power of choice. Donations range from $5 (sponsoring a meal) to $100 (after-school care). When presented with multiple options, people tend to focus more on the choice itself, making them more likely to choose at least one. By offering a structured selection, the machine nudges people toward making a donation rather than passing by.

Second, it shifts the decision from who to help to what to choose. Traditional charity appeals often focus on recipients such as disaster victims. This machine instead presents donors with tangible options such as bus passes, diapers, and hygiene kits, to name a few. This shift in framing nudges donors to engage more deeply by selecting specific solutions rather than simply reacting to an emotional appeal.

Third, the machine displays a pile of selected donations at the bottom. This is exactly an application of the goal-gradient hypothesis. People accelerate their efforts as they perceive themselves closer to a goal. Seeing donations accumulate creates an illusion of progress, encouraging more contributions.

A simple vending machine, yet a masterful execution of behavioral economics insights!

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Reference 1

Leotti, L. A., Iyengar, S. S., & Ochsner, K. N. (2010). Born to choose: The origins and value of the need for control. Trends in Cognitive Sciences, 14(10), 457-463.

Belief in one’s ability to exert control over the environment and to produce desired results is essential for an individual’s well-being. It has repeatedly been argued that perception of control is not only desirable, but is also probably a psychological and biological necessity. In this article, we review the literature supporting this claim and present evidence of a biological basis for the need for control and for choice—that is, the means by which we exercise control over the environment. Converging evidence from animal research, clinical studies, and neuroimaging suggests that the need for control is a biological imperative for survival, and a corticostriatal network is implicated as the neural substrate of this adaptive behavior.

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Reference 2

Sudhir, K., Roy, S., & Cherian, M. (2016). Do sympathy biases induce charitable giving? The effects of advertising content. Marketing Science, 35(6), 849-869.

We randomize advertising content motivated by the psychology literature on sympathy generation and framing effects in mailings to about 185,000 prospective new donors in India. We find a significant impact on the number of donors and amounts donated consistent with sympathy biases such as the “identifiable victim,” “in-group,” and “reference dependence.” A monthly reframing of the ask amount increases donors and the amount donated relative to daily reframing. A second field experiment targeted to past donors, finds that the effect of sympathy bias on giving is smaller in percentage terms but statistically and economically highly significant in terms of the magnitude of additional dollars raised. Methodologically, the paper complements the work of behavioral scholars by adopting an empirical researchers’ lens of measuring relative effect sizes and economic relevance of multiple behavioral theoretical constructs in the sympathy bias and charity domain within one field setting. Beyond the benefit of conceptual replications, the effect sizes provide guidance to managers on which behavioral theories are most managerially and economically relevant when developing advertising content.

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Reference 3

Kivetz, R., Urminsky, O., & Zheng, Y. (2006). The goal-gradient hypothesis resurrected: Purchase acceleration, illusionary goal progress, and customer retention. Journal of Marketing Research, 43(1), 39-58.

The goal-gradient hypothesis denotes the classic finding from behaviorism that animals expend more effort as they approach a reward. Building on this hypothesis, the authors generate new propositions for the human psychology of rewards. They test these propositions using field experiments, secondary customer data, paper-and-pencil problems, and Tobit and logit models. The key findings indicate that (1) participants in a real café reward program purchase coffee more frequently the closer they are to earning a free coffee; (2) Internet users who rate songs in return for reward certificates visit the rating Web site more often, rate more songs per visit, and persist longer in the rating effort as they approach the reward goal; (3) the illusion of progress toward the goal induces purchase acceleration (e.g., customers who receive a 12-stamp coffee card with 2 preexisting “bonus” stamps complete the 10 required purchases faster than customers who receive a “regular” 10-stamp card); and (4) a stronger tendency to accelerate toward the goal predicts greater retention and faster reengagement in the program. The conceptualization and empirical findings are captured by a parsimonious goal-distance model, in which effort investment is a function of the proportion of original distance remaining to the goal. In addition, using statistical and experimental controls, the authors rule out alternative explanations for the observed goal gradients. They discuss the theoretical significance of their findings and the managerial implications for incentive systems, promotions, and customer retention.

Cases

How salon-style displays enrich the art viewing experience

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On a recent visit to the Huntington Library, Art Museum, and Botanical Gardens in Los Angeles, I was struck by the “salon style” display of paintings—a densely arranged presentation that contrasts with today’s minimalistic museum trend.

A “salon style” hang not only looks different from how most museums are arranged today-it also changes the viewer’s experience. Instead of presenting works individually, with lots of space, the crowded layout puts paintings in a network, encouraging comparison and debate. Salon artists felt reaccured if their pictures were hung at eye level, and lamented when they were “skied” close to the ceiling. Placement of particular works was determined by level of detail, the hierarchy of genres (a tradition prioritizing history and religious paintings) and, most importantly, the personal politicis of the Academy.

Unlike the single-piece-focused, widely spaced approach seen in contemporary galleries, salon-style hanging places artworks in close clusters, prompting viewers to think differently. Psychologically, this arrangement affects perception in two ways.

First, works displayed at eye level attract more attention—a phenomenon known as “eye level, buy level.” It is well known that eye-level placement in retail settings drives choices. Similarly, artists historically loved this prime placement, aiming to capture viewers’ gaze.

Second and more importantly, viewers are inclined to compare artworks side by side. This phenomenon aligns with Hsee’s research on “joint evaluation (JE) versus separate evaluation (SE). When items are displayed jointly, people place greater emphasis on attributes that may otherwise be hard to assess, fostering a richer, multi-dimensional engagement with items. In historical salons, this might have encouraged viewers to notice intricate qualities in each painting, which might go overlooked today when artworks are displayed individually in modern galleries.

Building on these insights with another pieces of insights found ten years ago at the Museum of Fine Arts (MFA), Boston, museum directors must carefully consider how presentation contexts shape visitor experiences. Museum visitors, like consumers, are influenced by cognitive biases and contextual cues, making behavioral economics principles crucial for optimizing the museum experience.”

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Reference

Hsee, C. K. (1998). Less is better: When low‐value options are valued more highly than high‐value options. Journal of Behavioral Decision Making, 11(2), 107-121.

This research demonstrates a less-is-better effect in three contexts: (1) a person giving a $45 scarf as a gift was perceived to be more generous than one giving a $55 coat; (2) an overfilled ice cream serving with 7 oz of ice cream was valued more than an underfilled serving with 8 oz of ice cream; (3) a dinnerware set with 24 intact pieces was judged more favourably than one with 31 intact pieces (including the same 24) plus a few broken ones. This less-is-better effect occurred only when the options were evaluated separately, and reversed itself when the options were juxtaposed. These results are explained in terms of the evaluability hypothesis, which states that separate evaluations of objects are often infuenced by attributes which are easy to evaluate rather than by those which are important.

Cases

The power of defaults: How DMV’s organ donation question shapes decisions

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Recently, while applying for my driver license in California, I encountered a section about organ donation. The DMV’s (Department of Motor Vehicles) approach is an example of default.

First, they primed me with two statements:

  1. “One person can save up to 8 lives, and heal over 75, through organ and tissue donation for transplantation. You can register regardless of age or health.”
  2. “Organ donation happens after death, and your decision will not impact medical treatment.”

The first statement emphasizes the positive impact, while the second addresses potential concerns. This balanced approach put me at ease and highlighted benefits.

Then comes the question: “Would you like to register?” with two options: “Yes” or “Not at this time.” This is where default comes into play. By framing the question this way, they make saying “yes” feel like the natural choice.

Interestingly, even if I chose “Not at this time,” I was informed that I am still in the registry but without the pink dot on my license that indicates donor status. This opt-out process requires additional steps, making it more likely for people to remain registered.

This example resonates the findings of Johnson & Goldstein’s 2003 study on how defaults influence decision-making. By designing the process this way, the California DMV is likely increasing organ donation rates without forcing anyone’s hand.

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Reference

Johnson, E. J., & Goldstein, D. (2003). Do defaults save lives? Science, 302(5649), 1338–1339.

“If preferences concerning organ donation are strong, we would expect defaults to have little or no effect. However, as can be seen in the figure, defaults appear to make a large difference: the four opt-in countries (gold) had the lower rates than the six opt-out countries (blue)… One reason these results appear to be greater than those in our laboratory study is that the cost of changing from the default is higher; it involves filling out forms, making phone calls, and sending mail.” (pg. 1339)

Cases

Opt in vs. Opt out: Different defaults in different cities

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While I was staying in Toronto, I used to place an order in the same way. That is, I ordered turkey-breast on a six-inch, honey oat bread, with lettuce, tomatoes, onions, and black olives). 

I visited a recently opening Subway at my university and ordered the same meat and the same bread. Then, I said to a server the same vegetables. Surprisingly, she added cucumbers and peppers. I asked her why. She answered “I am opting out the vegetables customers say.”

I noticed that most Korean customers did not make any request about vegetables. They considered the whole five vegetables on the window as the default options. Only few customers said “everything but…”

For the people who do not usually make a series of choices for a single meal, opt out default vegetables may relieve their burden. I expect choosing from meats and breads to vegetables and dressings are demanding for most Asians. For them, choosing which vegetables to add are additionally demanding. When they skip choosing vegetables, they may enjoy meals more even though they do not like to eat more vegetables.

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Reference

Scheibehenne, B., Greifeneder, R., & Todd, P. M. (2010). Can There Ever Be Too Many Options? A Meta-Analytic Review of Choice Overload. Journal of Consumer Research, 37(3), 409–425.

The choice overload hypothesis states that an increase in the number of options to choose from may lead to adverse consequences such as a decrease in the motivation to choose or the satisfaction with the finally chosen option. A number of studies found strong instances of choice overload in the lab and in the field, but others found no such effects or found that more choices may instead facilitate choice and increase satisfaction. In a meta-analysis of 63 conditions from 50 published and unpublished experiments (N = 5,036), we found a mean effect size of virtually zero but considerable variance between studies. While further analyses indicated several potentially important preconditions for choice overload, no sufficient conditions could be identified. However, some idiosyncratic moderators proposed in single studies may still explain when and why choice overload reliably occurs; we review these studies and identify possible directions for future research.