Behavioural Economics

Choice architecture (Alec and Abdiraman)

Default, restricted, and mandated choice

Default choice - providers are able to plan for relatively few users
actually changing their settings, some surveys placing the number of
users who change their default settings as low as 5%. With this in
mind, have a remarkable amount of influence over the privacy settings
users have purely based on what default settings they implement.
[source]

Restricted choice - A restricted choice is defined as when the choice

for the consumer is restricted but it is still there. For example Red
Bull's brand exclusively sells energy drinks and thus restricts
consumers to a singular choice to make when buying their products.
The effect of this is that it creates a simple choice to make for
consumers and makes the brand stronger because it only has a single
product attached to it. Another possible example would be how
McDonalds shrunk down the choices of the typical American Diner to
a simple few in favour of speed and efficiency when making the food.

Mandated choice - Organ donations within are rather heavily

influenced by wherever the state has implemented an opt-in or opt-out
system. In opt-in systems, such as in Germany and the Netherlands,
donation rates rarely surpass 15%, on the other hand, opt-out
systems, such as in Austria and Belgium, donation rates typically
exceed 90%. People living in countries with opt-out systems are not
only more likely to end up donating their organs (because people are
lazy and opting out takes effort), but also tend to view the act itself as
less impactful and important of a choice. [source]

Nudge theory (Benjamin & Alva)

The British Behavioural Insights Team (BIT), changed the messaging on tax
letters in the United Kingdom to read “Nine out of ten people in the U.K. pay
their taxes on time. You are currently in the very small minority of people who
have not paid us yet.” This had a significant effect on the amount of people
who paid their taxes on time among a group of delinquent taxpayers, as out of
120,000, 4.9million pounds was collected. The organisation is also known for
encouraging loft insulation installation by providing low-cost labour to clear
people’s lofts so they could install insulation. This increased the rate of
installation fivefold.

The bins at Linnanmäki, which have a recorded voice message which plays
as a form of thanks when trash is placed in them. This promotes recycling
and prevents the negative externality of litter.
 Emojis to warn/encourage drivers to slow down in school areas, e.g. in Dubai
or in Finland.

Business Objectives

Corporate social responsibility (Maximus & Camilo)

Lego investing in making their plastic packages and their products more
sustainable and easily recyclable and the production of them carbon neutral.

Starbucks ethical sourcing - 2002 Starbucks launched a corporate social

responsibility report with the goal of becoming well-known for social
responsibility initiatives; in 2015 99% percent of its coffee supply chain was
ethically sourced and its aiming for 100%. Ethical sourcing is done through
partnerships with local coffee farmers and organisations

Market share

Samsung in smartphone market (Patxi and Sujatro)

New improved phones regularly released keeping the demand for new
smartphones high as people want the latest and best tech

Alphabet (parent company of google) in the software industry

Has a market share so large that any companies that start up to provide
competition or contribute to the market elsewhere tend to have their IP bought
out and the innovation incorporated into Google as a subsidiary/extension (i.e
Youtube, Android, bebop etc)

Satisficing

Growth

Tesla in electric car market; had growth without profit for years (Cedric &
Alexander)

Amazon experienced/s major growth since 2015. Have not paid dividends, as
Amazon has invested all profit into growth.

YED and

Firms

Making large investments at the start of an upswing in the business cycle so

revenues can pay loans back e.g. UPM building a new paper machine

Structural Change

Primary products are inelastic in PED and YED so LEDCs, dependent on

primary products e.g. Ethiopia and coffee or Zambia and copper, are far more
susceptible to small changes in income and price. Once the secondary and
 tertiary sectors dominate, with elastic YED and PED, macro-economies are
not so susceptible to small changes in income

Responses to asymmetric information

Legislation and regulation

Ban on flavoured cigarettes and roll your own tobacco

On May 2016 a ban on flavoured tobacco products was imposed this
included vanilla, candy and other flavours. However flavors that make
up over 3% of the market such as menthol had the ban imposed in
2020. This ban was due to the belief that flavored tobacco products
promote the use of tobacco,
EU Alcohol Strategy (part of cancer prevention policy) (2021):
striving to reduce online alcohol advertising and marketing towards
young people
propose mandatory ingredient and nutritional labeling for alcoholic
beverages by the end of 2022
propose health warning labels
review its own alcoholic beverage promotion policy
regulation:
Alcoholic beverage labels provide sufficient health related information

Provision of information

i. EU Regulation 1169/2011 requires all food products sold in EU countries to

have specific information about the product and the producer, e.g. list of
ingredients, producers address, country of origin etc.

ii. The Tobacco Products Directive (2014/40/EU) requires tobacco products to

have health warnings that inform consumers of the dangers of smoking, lung
cancer etc.

Market power:

Perfect competition

Monopoly - EpiPen (thought it’d be helpful for yall :)

Oligopoly- OPEC

Monopolistic competition

Monopoly and

Risks to society

Government intervention to control