individual dispute resolution: insights from behavioural economics
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Individual Dispute Resolution: Insights from Behavioural Economics. Rachel McCloy. Overview. Economic vs. Behavioural Economic models of decision-making Applications of BE – current climate Mindspace Applying BE to Individual Dispute Resolution. Economic models of choice. Homo economicus - PowerPoint PPT PresentationTRANSCRIPT
© University of Reading 2008 www.reading.ac.uk
Centre for Applied Behavioural Science (CABS)
April 20, 2023
Individual Dispute Resolution: Insights from Behavioural Economics
Rachel McCloy
Overview• Economic vs. Behavioural Economic models of
decision-making
• Applications of BE – current climate
• Mindspace
• Applying BE to Individual Dispute Resolution
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Economic models of choice
• Homo economicus
• Traditional economic models of decision-making assume that:– People are rational
– Rationality = Consistency
– People have perfect information
– People perform cost/benefit analyses
– Decisions not guided by emotions or other “irrelevant” factors
• This is not always the case!
3
Behavioural Economics
• Homo Homer Simpsonus
• Often influenced by irrelevant factors (90% fat free)
• Don’t always make best possible decision – Often take to long (deciding where
to jump out of way of bus)
– Often don’t have all information
– Can’t hold all information in mind
– Make decisions that are “good enough”• satisficing
4
Current climate
• Move to applying behavioural economics in understanding and influencing everyday behaviour
• Kahneman – Thinking fast and slow
• “Nudge” agenda
• Behavioural Insights Team and Mindspace– 9 robust influences on behaviour
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Messenger We are heavily influenced by who communicates information
Incentives Our responses to incentives are shaped by predictable mental shortcuts such as strongly avoiding losses
Norms We are strongly influenced by what others do
Defaults We “go with the flow” of preset options
Salience Our attention is drawn to what’s novel and seems relevant to us
Priming Our acts are often influenced by cues in the world around us
Affect Our emotional associations can powerfully shape our actions
Commitments We seek to be consistent with our public promises, and reciprocate acts
Ego We act in ways that make us feel better about ourselves 6
Examples• Incentives:
– More than just traditional financial incentives– People do not respond to incentives in a
straightforward way• More concerned with losses than gains• More concerned with short-term than long-
term gain• Engage in mental accounting (with money,
time etc.)• Sometimes financial incentives can get in the
way
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Incentives
• Should we pay people to recycle? To lose weight?
• Insulation and incentives– Council tax seen as a loss– Council tax rebates very effective as an incentive– Worth more to people than the same amount of money
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Examples• Norms:
– Real or perceived social norms are important– Personal, local, national and international norms
• E.g., “women didn’t go into a pub or club alone”
– Can be implicit in how you describe events• E.g,. More people are doing X vs. Most people
aren’t doing X
• What norms are acting on the individual? Can these norms be changed?
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Applying BE to individual dispute resolution
• Messenger– From whom is the individual receiving messages
about dispute resolution?– Do they trust them? Do they respect them?
• Incentives– Insensitivity to probabilities when potential financial
gains are high – High motivation to avoid loss – are mechanisms for
resolving disputes seen in terms of losses or gains
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Applying BE to individual dispute resolution
• Norms– What are the norms of the workplace around dispute
resolution? What are the norms of the peer group?– Broader norms – “spiraling out of control”– Overconfidence
• Defaults– Is there a real or perceived default mechanism in
place for dealing with disputes?– Habitual style of dealing with disputes
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Applying BE to individual dispute resolution• Salience
– What forms of dispute resolution are salient to the individual?– Do they feel they are relevant to them?
• Priming– What cues?– What messages about dispute resolution are implicit in the
workplace?
• Affect– Role of emotions– Anticipated regret and the Omission Bias (status quo)– ACAS “It doesn’t have to get ugly”
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Applying BE to individual dispute resolution
• Commitments– Public commitments can help embed new behaviours– These can be used in dispute resolution procedures
and codes of conduct
• Ego– What makes the individual feel good about
themselves?– What kind of person do they think they are?
(Consistency)
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Conclusions
• Think of the social, emotional and environmental context in which people are making choices with regards to dispute resolution
• Think about the pre-existing cognitive biases that individuals bring to these decisions
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