Consumer
BEHAVIOUR
,Laura C / Tilburg University
MEETING 1. INTRODUCTION _____________________________________________________________ 3
NOTES FROM LECTURE 1 ________________________________________________________________ 3
MEETING 2. HEURISTICS, BIASES, & NUDGING ___________________________________________ 7
NOTES FROM LECTURE 2 _______________________________________________________________ 11
MEETING 3. INTUITION, REFLECTION, & SELF-CONTROL _________________________________ 17
NOTES FROM LECTURE 3 _______________________________________________________________ 32
MEETING 4. EVOLUTIONARY PERSPECTIVES ____________________________________________ 38
NOTES FROM LECTURE 4 _______________________________________________________________ 42
MEETING 5. HAPPINESS ________________________________________________________________ 47
NOTES FROM LECTURE 5 _______________________________________________________________ 52
MEETING 6. SUSTAINABILITY & THE GREATER GOOD _____________________________________ 58
NOTES FROM LECTURE 6 _______________________________________________________________ 66
MEETING 7. NEGOTIATIONS ____________________________________________________________ 71
NOTES FROM LECTURE 7 _______________________________________________________________ 80
MEETING 8. PRICING ___________________________________________________________________ 87
NOTES FROM LECTURE 8 _______________________________________________________________ 88
MEETING 9. CONSUMER REVIEWS ______________________________________________________ 95
NOTES FROM LECTURE 9 _______________________________________________________________ 98
MEETING 10. MOTIVATED INFORMATION PROCESSING _________________________________ 103
NOTES FROM LECTURE 10 _____________________________________________________________ 108
MEETING 11. ALGORITHMS ____________________________________________________________ 115
NOTES FROM LECTURE 11 _____________________________________________________________ 120
MEETING 12. MORALITY OF MARKETS __________________________________________________ 126
NOTES FROM LECTURE 12 _____________________________________________________________ 130
2
, Laura C / Tilburg University
Meeting 1. Introduction
No readings
Notes from Lecture 1
Preferences
Preference is the degree of liking for something or the ranking of options in choice.
The rational choice theory assumes people have well-defined preferences and make decisions
to fit them. An alternative view of preference construction suggests that preferences are often
labile, inconsistent, and subject to various factors. The Ariely et al. (2006) study on attending
a free poetry reading is used as an example to illustrate preference reversals, showing how
payment or being paid can significantly influence attendance decisions => context matters in
shaping preferences. The study involved two conditions to examine how payment or being
paid affected the decision to attend a poetry reading
The two conditions and the findings were:
→ Pay condition (N = 75): Participants in this condition were asked about their willingness
to attend a free poetry reading under two scenarios:
Would you pay $2 to attend? Only 3% said yes
Would you attend if it were free ($0)? 35% said yes
→ Get paid condition (N = 71): Participants in this condition were asked about their
willingness to attend a free poetry reading under two scenarios:
Would you get paid $2 to attend? 59% said yes
Would you attend if it were free ($0)? Only 8% said yes
The results of this study demonstrate preference reversals. In the pay condition, a
substantial percentage of participants were willing to attend for free, but very few were
willing to pay a small amount. This suggests that introducing a cost made the event less
appealing for many.
Conversely, in the get paid condition, a majority of participants were willing to attend
if they were paid, but a much smaller percentage were willing to attend for free. This implies
that the offer of payment made the event more attractive to many, and when the payment was
removed, the appeal significantly decreased.
Theories
A theory is defined as a system of ideas intended to explain something or a model. All
theories have blind spots.
What make a theory useful:
internally consistent (not contradict itself)
testable predictions
empirical support (being likely to be true)
3
, Laura C / Tilburg University
If the tested predictions are not supported by empirical data, then update, refine, or
change the theory. However, if there is inconsistent evidence is found, that may make it
harder to develop theories. Ideally theories can explain a variety of effects, rather than a new
theory for every new empirical finding
Examples:
Ego Depletion (Baumeister et al., 2007):
self-control is a limited resource.
using self-control in one task reduces the ability to use it in another.
glucose may be the resource that gets depleted during self-control.
Criteria for a good theory:
Internally Consistent (no contradictions):
unclear and circular definitions of self-control (e.g., working memory, emotional
reactions, attention).
the same task can be used as both an ego depletion and control task in different
studies.
Testable Predictions
performing a task that uses self-control should impair performance on a following
self-control task.
consuming glucose after the first task should boost performance on the second task.
important questions remain, such as: how long or intense does the first task need to be
to cause ego depletion?
Empirically Supported (backed by data and likely to be true)
the glucose explanation is biologically unlikely within the timeframes tested and lacks
supporting evidence (Vadillo et al., 2016).
the psychological effect of ego depletion has failed to replicate in larger-scale studies
(Hagger et al., 2016; Vohs et al., 2021).
Generality-Specificity Tradeoff
General Theories:
apply broadly across many phenomena and behaviours.
example: evolution (high generality, lower specificity).
Specific Theories:
make precise predictions about specific situations.
example: physics (high specificity, lower generality).
Examples:
Gambler’s fallacy: The false belief that past random
outcomes affect future ones.
Example: If a coin lands on heads repeatedly,
people wrongly believe tails is now more likely.
In reality, if the coin is fair, each flip is
independent with a 50% chance.
4
, Laura C / Tilburg University
Cautions about highly specific theories
They can be tautological1/ “optimism bias” (e.g., "I did it because I wanted to").
May use fancy terminology to mask circular reasoning.
Often raise deeper "why" questions:
proximate mechanism: how is the behaviour generated?
ultimate mechanism: why was this behaviour evolutionarily favoured?
Chocolate bar example:
Why did I buy it?
→ preference (basic answer).
→ brain chemistry (proximate cause).
→ evolutionary adaptation (ultimate cause).
Proximate and ultimate explanations
Proximate explanations focus on the immediate mechanisms or processes that drive
a behaviour- essentially answering the question, “How does this happen?” For example,
cooperative behaviour may arise due to religion, social norms, or a desire for praise and
avoidance of blame. These explanations are more specific but less general, often rooted in
observable and psychological processes.
Ultimate explanations address the evolutionary purpose or adaptive value of a
behaviour- answering, “Why does this behaviour exist?” From this perspective, cooperation
might exist because it promotes mutual benefit or helps relatives, thereby increasing inclusive
fitness (the evolutionary success of an individual’s genes, including those shared with kin).
These explanations tend to be more general but less specific, highlighting the broader
function of behaviour in terms of survival and reproduction.
This framework applies across domains. For instance, infant crying can be proximally
explained by separation anxiety or physiological needs, but ultimately, it serves to elicit
caregiving, which boosts survival chances. Similarly, while epigenetic traits are proximally
inherited through biological mechanisms, their ultimate function may be to enhance
adaptability in changing environments.
Proximate Explanation Ultimate Explanation
Topic (How?) (Why?)
More specific, less general Less specific, more general
Cooperative Religion, reciprocity, concern Helps kin or is mutually beneficial,
behavior for praise/blame increasing inclusive fitness
Linguistic Enables cooperation, comunication and
Cultural transmission
structure boosts fitness
Increases adaptability across
Epigenetics Inherited epigenetic changes environments
Separation anxiety, hunger,
Infant crying cold Triggers care from adults → survival ↑
1
Tautological means a statement or explanation that is circular—it repeats itself without providing real
insight or new information. "I bought the chocolate bar because I wanted to."- that doesn't actually explain why
you wanted it—it just restates the action using different words.
5
, Laura C / Tilburg University
Proximate Explanation Ultimate Explanation
Topic (How?) (Why?)
More specific, less general Less specific, more general
Human Cognitive module for social Helps defend against or engage in
reasoning exchange exploitation, enhancing fitness
6
, Laura C / Tilburg University
Meeting 2. Heuristics, biases, & nudging
• Reisch, L. A., & Zhao, M. I. N.
(2017). Behavioural economics, consumer
behaviour and consumer policy: State of the
art. Behavioural Public Policy, 1(2), 190–206.
• Mertens, S., Herberz, M., Hahnel, U.
J., & Brosch, T. (2022). The effectiveness of
nudging: A meta-analysis of choice
architecture interventions across behavioral
domains. Proceedings of the National
Academy of Sciences, 119(1), e2107346118.
• Maier, M., Bartoš, F., Stanley, T. D.,
Shanks, D. R., Harris, A. J., & Wagenmakers,
E. J. (2022). No evidence for nudging after
adjusting for publication bias. Proceedings of the National Academy of Sciences, 119(31),
e2200300119.
biases: systematic deviations from rationality
heuristics: mental short-cuts
Kahneman & Tversky studied how people actually make decisions and integrated
psychological principles
Reisch, L. A., & Zhao, M. I. N. (2017). Behavioural economics, consumer
behaviour and consumer policy: State of the art. Behavioural Public Policy, 1(2), 190–
206.
Traditionally, economic policy and the understanding of consumers were based on the
idea of Homo oeconomicus – a rational being who actively seeks information, considers all
costs and benefits, and acts according to their stable preferences. However, psychologists
have long recognized that consumers exhibit bounded rationality, meaning they deviate
from this ideal in predictable ways and can make errors that harm their own interests. This is
because people often rely on decision heuristics and biases, and their choices are significantly
affected by the specific situation they are in. Even seemingly unimportant factors can have a
substantial impact on what consumers decide.
Several key behavioural principles that influence consumer decisions are:
Status quo bias: Because people use a reference point to evaluate options as gains or losses,
and because they experience loss aversion (losses feel more significant than
equivalent gains), consumers tend to stick with the current or pre-set option (the status
quo) rather than switching. For example, making enrolment in retirement savings
automatic significantly increases participation, and setting organ donation as the
default leads to higher donation rates
Endowment effect: This bias refers to the tendency to value something more highly once it
belongs to you compared to something you don't own. This has been shown in
experiments where people were willing to pay more for a mug they already possessed
than those who did not. Even a sense of perceived ownership, like touching a product
screen, can increase its perceived value
7
, Laura C / Tilburg University
Mental accounting: People mentally categorize their finances and control spending based on
these categories. Earmarking expenses for specific purposes can improve self-control
and increase enjoyment of purchases within those categories. Earmarking is a type of
cognitive bookkeeping that individuals use to keep track of financial activities and to
control consumption. It involves assigning expenses into different (mental) categories
(e.g., food and entertainment) and constraining spending based on the pre-assigned
budget in each category.
The sunk-cost fallacy is another aspect, where people irrationally continue with an
activity because they have already invested time or money in it, even if it's no longer
enjoyable or beneficial. For instance, someone might go skiing on a rainy day because they
already bought the lift ticket
Heuristics and biases: Beyond prospect theory and mental accounting, other mental
shortcuts influence decisions:
Availability heuristic: People make judgments based on how easily information comes
to mind. If something is easily recalled, it's perceived as more common or important
Salience heuristic: Information that is more noticeable or attention-grabbing has a
greater impact on decisions. Making healthy food options more visible can nudge people
towards healthier choices
Anchoring effect: People rely too heavily on the first piece of information offered (the
"anchor") when making decisions, even if that information is arbitrary. For example,
suggested donation amounts can influence how much people donate
Simplicity: Reducing the effort or complexity of a decision can significantly increase
the likelihood of a desired behaviour. Simplifying tax filing or having one savings goal
instead of many can lead to better outcomes
Contextual factors: Seemingly irrelevant aspects of the environment can also powerfully
influence behaviour. These are sometimes called "channel forces". For example,
playing French music in a wine store can increase sales of French wine. Even physical
cues like the perceived height or the presence of a virtual boundary in a queue can
affect people's mindset and behaviour.
Recognizing these influences, policymakers have become interested in using
behavioural insights to design more effective consumer policies. This has led to the use of
nudges, which are low-cost, choice-preserving interventions that guide people towards better
decisions for themselves. Examples include setting smart defaults for pension schemes,
simplifying information, and using salience to highlight beneficial options. This approach is
based on libertarian paternalism, which aims to steer choices in a positive direction while
still preserving freedom of choice through the design of the choice architecture.
While nudges have gained popularity, ethical considerations are important.
Transparency about nudges generally doesn't reduce their effectiveness. Public approval for
nudges is generally high, especially when the goals are seen as legitimate and aligned with
most people's interests. However, there are ongoing questions about the long-term
sustainability of nudges, potential unintended side effects like moral licensing (engaging in a
behaviour perceived as morally good can psychologically license a subsequent behaviour that
might be considered less desirable or counter to the initial virtuous act2) or the rebound
effect (a situation that can lead to the paradoxical result that while the individual impact of a
2
consumers might feel entitled to eat unhealthy food after performing a virtuous act like buying fair-
trade coffee
8
, Laura C / Tilburg University
consumption decision declines, the overall consumption impact increases due to intensified
consumption3), and the need for socially debated rules for the ethical governance of
behaviourally informed regulation.
Mertens, S., Herberz, M., Hahnel, U. J., & Brosch, T. (2022). The effectiveness of
nudging: A meta-analysis of choice architecture interventions across behavioral
domains. Proceedings of the National Academy of Sciences, 119(1), e2107346118.
Choice architecture interventions aim to facilitate personally and socially desirable
decisions by designing choice environments while preserving freedom of choice. This
approach is built on insights from behavioural sciences and offers a complement to traditional
microeconomic and psychological interventions that often assume rational decision-making
Traditional rational agent models assume individuals make decisions based on
consistent preferences to maximize utility through exhaustive analysis of costs and benefits.
Interventions based on these models often involve education or economic incentives.
Behavioural science-informed approaches acknowledge that people have bounded
rationality and rely on automatic and less intensive forms of decision making, making them
susceptible to contextual influences
in the choice architecture. Nudging
leverages this susceptibility to guide
behaviour. The concept gained
widespread attention following the
publication of Thaler and Sunstein's
book "Nudge" in 2008. The number
of citations to this work has
increased significantly since its
publication.
People often make decisions
without full access to all relevant
information, relying instead on what is immediately available and understandable. As a
result, complex or irrelevant details are frequently ignored. To address this, choice
architecture interventions can be used to enhance the availability, clarity, and personal
relevance of decision-relevant information. For example, presenting social reference
information, such as comparisons of energy use with neighbours, has been shown to reduce
energy consumption, as demonstrated in a large field study with U.S. households. Other
methods include increasing the visibility of information, like using feedback devices or
nutrition labels, and simplifying or reframing content to make it more digestible.
Beyond information, people also respond to how choices are presented within their
environment. Rather than conducting detailed comparisons of options, individuals rely on
contextual cues from the structure of decisions. Interventions that modify the decision
structure—such as setting default options, adjusting the effort required to select an option, or
changing the composition and consequences of available choices—can significantly influence
behaviour. One powerful example is the difference in organ donor rates across countries:
3
using a fuel-efficient car (which reduces CO2 emissions per mile), but then driving more miles,
leading to an overall increase in CO2 emissions
9
, Laura C / Tilburg University
nations with a default of presumed consent had far higher participation than those requiring
explicit consent.
Even when people make deliberate decisions to change behaviour, they often struggle
to act on them due to limited attention and self-control. This gap between intention and
behaviour can be addressed through decision assistance interventions, which reinforce self-
regulation. Commitment devices are one such tool; they help overcome psychological
obstacles like procrastination. For instance, in the Save More Tomorrow program, employees
who committed in advance to allocating future salary increases to retirement savings
substantially boosted their saving rates. Additionally, reminders serve to make intended
behaviours more salient, helping individuals stay on track.
Key Findings:
Decision structure interventions (altering the arrangement of choices), with an
average effect size of d = 0.54, were more effective than decision information (d = 0.34) and
decision assistance interventions (d = 0.28). Examples of decision structure techniques
include changing choice defaults, option-related effort, range/composition of options, and
option consequences.
Choice architecture interventions are effective at influencing behaviour, with decision
structure changes (like defaults) showing the strongest effects. These interventions are
effective across various behavioural domains (especially food and health) and work in both
lab and real-world settings. However, there may be a decline in effect sizes in more recent
studies, which could signal adaptation or diminishing novelty.
Defaults are a type of choice architecture intervention where a particular option is pre-
selected or automatically chosen unless the individual actively opts for something else. They
are powerful because many people tend to go with the default—either out of convenience,
inattention, or a perception that it’s the recommended choice.
Decision information interventions (increasing information availability and
comprehensibility) had a smaller effect. Techniques include translating information, making
information visible, and providing social reference points.
10
BEHAVIOUR
,Laura C / Tilburg University
MEETING 1. INTRODUCTION _____________________________________________________________ 3
NOTES FROM LECTURE 1 ________________________________________________________________ 3
MEETING 2. HEURISTICS, BIASES, & NUDGING ___________________________________________ 7
NOTES FROM LECTURE 2 _______________________________________________________________ 11
MEETING 3. INTUITION, REFLECTION, & SELF-CONTROL _________________________________ 17
NOTES FROM LECTURE 3 _______________________________________________________________ 32
MEETING 4. EVOLUTIONARY PERSPECTIVES ____________________________________________ 38
NOTES FROM LECTURE 4 _______________________________________________________________ 42
MEETING 5. HAPPINESS ________________________________________________________________ 47
NOTES FROM LECTURE 5 _______________________________________________________________ 52
MEETING 6. SUSTAINABILITY & THE GREATER GOOD _____________________________________ 58
NOTES FROM LECTURE 6 _______________________________________________________________ 66
MEETING 7. NEGOTIATIONS ____________________________________________________________ 71
NOTES FROM LECTURE 7 _______________________________________________________________ 80
MEETING 8. PRICING ___________________________________________________________________ 87
NOTES FROM LECTURE 8 _______________________________________________________________ 88
MEETING 9. CONSUMER REVIEWS ______________________________________________________ 95
NOTES FROM LECTURE 9 _______________________________________________________________ 98
MEETING 10. MOTIVATED INFORMATION PROCESSING _________________________________ 103
NOTES FROM LECTURE 10 _____________________________________________________________ 108
MEETING 11. ALGORITHMS ____________________________________________________________ 115
NOTES FROM LECTURE 11 _____________________________________________________________ 120
MEETING 12. MORALITY OF MARKETS __________________________________________________ 126
NOTES FROM LECTURE 12 _____________________________________________________________ 130
2
, Laura C / Tilburg University
Meeting 1. Introduction
No readings
Notes from Lecture 1
Preferences
Preference is the degree of liking for something or the ranking of options in choice.
The rational choice theory assumes people have well-defined preferences and make decisions
to fit them. An alternative view of preference construction suggests that preferences are often
labile, inconsistent, and subject to various factors. The Ariely et al. (2006) study on attending
a free poetry reading is used as an example to illustrate preference reversals, showing how
payment or being paid can significantly influence attendance decisions => context matters in
shaping preferences. The study involved two conditions to examine how payment or being
paid affected the decision to attend a poetry reading
The two conditions and the findings were:
→ Pay condition (N = 75): Participants in this condition were asked about their willingness
to attend a free poetry reading under two scenarios:
Would you pay $2 to attend? Only 3% said yes
Would you attend if it were free ($0)? 35% said yes
→ Get paid condition (N = 71): Participants in this condition were asked about their
willingness to attend a free poetry reading under two scenarios:
Would you get paid $2 to attend? 59% said yes
Would you attend if it were free ($0)? Only 8% said yes
The results of this study demonstrate preference reversals. In the pay condition, a
substantial percentage of participants were willing to attend for free, but very few were
willing to pay a small amount. This suggests that introducing a cost made the event less
appealing for many.
Conversely, in the get paid condition, a majority of participants were willing to attend
if they were paid, but a much smaller percentage were willing to attend for free. This implies
that the offer of payment made the event more attractive to many, and when the payment was
removed, the appeal significantly decreased.
Theories
A theory is defined as a system of ideas intended to explain something or a model. All
theories have blind spots.
What make a theory useful:
internally consistent (not contradict itself)
testable predictions
empirical support (being likely to be true)
3
, Laura C / Tilburg University
If the tested predictions are not supported by empirical data, then update, refine, or
change the theory. However, if there is inconsistent evidence is found, that may make it
harder to develop theories. Ideally theories can explain a variety of effects, rather than a new
theory for every new empirical finding
Examples:
Ego Depletion (Baumeister et al., 2007):
self-control is a limited resource.
using self-control in one task reduces the ability to use it in another.
glucose may be the resource that gets depleted during self-control.
Criteria for a good theory:
Internally Consistent (no contradictions):
unclear and circular definitions of self-control (e.g., working memory, emotional
reactions, attention).
the same task can be used as both an ego depletion and control task in different
studies.
Testable Predictions
performing a task that uses self-control should impair performance on a following
self-control task.
consuming glucose after the first task should boost performance on the second task.
important questions remain, such as: how long or intense does the first task need to be
to cause ego depletion?
Empirically Supported (backed by data and likely to be true)
the glucose explanation is biologically unlikely within the timeframes tested and lacks
supporting evidence (Vadillo et al., 2016).
the psychological effect of ego depletion has failed to replicate in larger-scale studies
(Hagger et al., 2016; Vohs et al., 2021).
Generality-Specificity Tradeoff
General Theories:
apply broadly across many phenomena and behaviours.
example: evolution (high generality, lower specificity).
Specific Theories:
make precise predictions about specific situations.
example: physics (high specificity, lower generality).
Examples:
Gambler’s fallacy: The false belief that past random
outcomes affect future ones.
Example: If a coin lands on heads repeatedly,
people wrongly believe tails is now more likely.
In reality, if the coin is fair, each flip is
independent with a 50% chance.
4
, Laura C / Tilburg University
Cautions about highly specific theories
They can be tautological1/ “optimism bias” (e.g., "I did it because I wanted to").
May use fancy terminology to mask circular reasoning.
Often raise deeper "why" questions:
proximate mechanism: how is the behaviour generated?
ultimate mechanism: why was this behaviour evolutionarily favoured?
Chocolate bar example:
Why did I buy it?
→ preference (basic answer).
→ brain chemistry (proximate cause).
→ evolutionary adaptation (ultimate cause).
Proximate and ultimate explanations
Proximate explanations focus on the immediate mechanisms or processes that drive
a behaviour- essentially answering the question, “How does this happen?” For example,
cooperative behaviour may arise due to religion, social norms, or a desire for praise and
avoidance of blame. These explanations are more specific but less general, often rooted in
observable and psychological processes.
Ultimate explanations address the evolutionary purpose or adaptive value of a
behaviour- answering, “Why does this behaviour exist?” From this perspective, cooperation
might exist because it promotes mutual benefit or helps relatives, thereby increasing inclusive
fitness (the evolutionary success of an individual’s genes, including those shared with kin).
These explanations tend to be more general but less specific, highlighting the broader
function of behaviour in terms of survival and reproduction.
This framework applies across domains. For instance, infant crying can be proximally
explained by separation anxiety or physiological needs, but ultimately, it serves to elicit
caregiving, which boosts survival chances. Similarly, while epigenetic traits are proximally
inherited through biological mechanisms, their ultimate function may be to enhance
adaptability in changing environments.
Proximate Explanation Ultimate Explanation
Topic (How?) (Why?)
More specific, less general Less specific, more general
Cooperative Religion, reciprocity, concern Helps kin or is mutually beneficial,
behavior for praise/blame increasing inclusive fitness
Linguistic Enables cooperation, comunication and
Cultural transmission
structure boosts fitness
Increases adaptability across
Epigenetics Inherited epigenetic changes environments
Separation anxiety, hunger,
Infant crying cold Triggers care from adults → survival ↑
1
Tautological means a statement or explanation that is circular—it repeats itself without providing real
insight or new information. "I bought the chocolate bar because I wanted to."- that doesn't actually explain why
you wanted it—it just restates the action using different words.
5
, Laura C / Tilburg University
Proximate Explanation Ultimate Explanation
Topic (How?) (Why?)
More specific, less general Less specific, more general
Human Cognitive module for social Helps defend against or engage in
reasoning exchange exploitation, enhancing fitness
6
, Laura C / Tilburg University
Meeting 2. Heuristics, biases, & nudging
• Reisch, L. A., & Zhao, M. I. N.
(2017). Behavioural economics, consumer
behaviour and consumer policy: State of the
art. Behavioural Public Policy, 1(2), 190–206.
• Mertens, S., Herberz, M., Hahnel, U.
J., & Brosch, T. (2022). The effectiveness of
nudging: A meta-analysis of choice
architecture interventions across behavioral
domains. Proceedings of the National
Academy of Sciences, 119(1), e2107346118.
• Maier, M., Bartoš, F., Stanley, T. D.,
Shanks, D. R., Harris, A. J., & Wagenmakers,
E. J. (2022). No evidence for nudging after
adjusting for publication bias. Proceedings of the National Academy of Sciences, 119(31),
e2200300119.
biases: systematic deviations from rationality
heuristics: mental short-cuts
Kahneman & Tversky studied how people actually make decisions and integrated
psychological principles
Reisch, L. A., & Zhao, M. I. N. (2017). Behavioural economics, consumer
behaviour and consumer policy: State of the art. Behavioural Public Policy, 1(2), 190–
206.
Traditionally, economic policy and the understanding of consumers were based on the
idea of Homo oeconomicus – a rational being who actively seeks information, considers all
costs and benefits, and acts according to their stable preferences. However, psychologists
have long recognized that consumers exhibit bounded rationality, meaning they deviate
from this ideal in predictable ways and can make errors that harm their own interests. This is
because people often rely on decision heuristics and biases, and their choices are significantly
affected by the specific situation they are in. Even seemingly unimportant factors can have a
substantial impact on what consumers decide.
Several key behavioural principles that influence consumer decisions are:
Status quo bias: Because people use a reference point to evaluate options as gains or losses,
and because they experience loss aversion (losses feel more significant than
equivalent gains), consumers tend to stick with the current or pre-set option (the status
quo) rather than switching. For example, making enrolment in retirement savings
automatic significantly increases participation, and setting organ donation as the
default leads to higher donation rates
Endowment effect: This bias refers to the tendency to value something more highly once it
belongs to you compared to something you don't own. This has been shown in
experiments where people were willing to pay more for a mug they already possessed
than those who did not. Even a sense of perceived ownership, like touching a product
screen, can increase its perceived value
7
, Laura C / Tilburg University
Mental accounting: People mentally categorize their finances and control spending based on
these categories. Earmarking expenses for specific purposes can improve self-control
and increase enjoyment of purchases within those categories. Earmarking is a type of
cognitive bookkeeping that individuals use to keep track of financial activities and to
control consumption. It involves assigning expenses into different (mental) categories
(e.g., food and entertainment) and constraining spending based on the pre-assigned
budget in each category.
The sunk-cost fallacy is another aspect, where people irrationally continue with an
activity because they have already invested time or money in it, even if it's no longer
enjoyable or beneficial. For instance, someone might go skiing on a rainy day because they
already bought the lift ticket
Heuristics and biases: Beyond prospect theory and mental accounting, other mental
shortcuts influence decisions:
Availability heuristic: People make judgments based on how easily information comes
to mind. If something is easily recalled, it's perceived as more common or important
Salience heuristic: Information that is more noticeable or attention-grabbing has a
greater impact on decisions. Making healthy food options more visible can nudge people
towards healthier choices
Anchoring effect: People rely too heavily on the first piece of information offered (the
"anchor") when making decisions, even if that information is arbitrary. For example,
suggested donation amounts can influence how much people donate
Simplicity: Reducing the effort or complexity of a decision can significantly increase
the likelihood of a desired behaviour. Simplifying tax filing or having one savings goal
instead of many can lead to better outcomes
Contextual factors: Seemingly irrelevant aspects of the environment can also powerfully
influence behaviour. These are sometimes called "channel forces". For example,
playing French music in a wine store can increase sales of French wine. Even physical
cues like the perceived height or the presence of a virtual boundary in a queue can
affect people's mindset and behaviour.
Recognizing these influences, policymakers have become interested in using
behavioural insights to design more effective consumer policies. This has led to the use of
nudges, which are low-cost, choice-preserving interventions that guide people towards better
decisions for themselves. Examples include setting smart defaults for pension schemes,
simplifying information, and using salience to highlight beneficial options. This approach is
based on libertarian paternalism, which aims to steer choices in a positive direction while
still preserving freedom of choice through the design of the choice architecture.
While nudges have gained popularity, ethical considerations are important.
Transparency about nudges generally doesn't reduce their effectiveness. Public approval for
nudges is generally high, especially when the goals are seen as legitimate and aligned with
most people's interests. However, there are ongoing questions about the long-term
sustainability of nudges, potential unintended side effects like moral licensing (engaging in a
behaviour perceived as morally good can psychologically license a subsequent behaviour that
might be considered less desirable or counter to the initial virtuous act2) or the rebound
effect (a situation that can lead to the paradoxical result that while the individual impact of a
2
consumers might feel entitled to eat unhealthy food after performing a virtuous act like buying fair-
trade coffee
8
, Laura C / Tilburg University
consumption decision declines, the overall consumption impact increases due to intensified
consumption3), and the need for socially debated rules for the ethical governance of
behaviourally informed regulation.
Mertens, S., Herberz, M., Hahnel, U. J., & Brosch, T. (2022). The effectiveness of
nudging: A meta-analysis of choice architecture interventions across behavioral
domains. Proceedings of the National Academy of Sciences, 119(1), e2107346118.
Choice architecture interventions aim to facilitate personally and socially desirable
decisions by designing choice environments while preserving freedom of choice. This
approach is built on insights from behavioural sciences and offers a complement to traditional
microeconomic and psychological interventions that often assume rational decision-making
Traditional rational agent models assume individuals make decisions based on
consistent preferences to maximize utility through exhaustive analysis of costs and benefits.
Interventions based on these models often involve education or economic incentives.
Behavioural science-informed approaches acknowledge that people have bounded
rationality and rely on automatic and less intensive forms of decision making, making them
susceptible to contextual influences
in the choice architecture. Nudging
leverages this susceptibility to guide
behaviour. The concept gained
widespread attention following the
publication of Thaler and Sunstein's
book "Nudge" in 2008. The number
of citations to this work has
increased significantly since its
publication.
People often make decisions
without full access to all relevant
information, relying instead on what is immediately available and understandable. As a
result, complex or irrelevant details are frequently ignored. To address this, choice
architecture interventions can be used to enhance the availability, clarity, and personal
relevance of decision-relevant information. For example, presenting social reference
information, such as comparisons of energy use with neighbours, has been shown to reduce
energy consumption, as demonstrated in a large field study with U.S. households. Other
methods include increasing the visibility of information, like using feedback devices or
nutrition labels, and simplifying or reframing content to make it more digestible.
Beyond information, people also respond to how choices are presented within their
environment. Rather than conducting detailed comparisons of options, individuals rely on
contextual cues from the structure of decisions. Interventions that modify the decision
structure—such as setting default options, adjusting the effort required to select an option, or
changing the composition and consequences of available choices—can significantly influence
behaviour. One powerful example is the difference in organ donor rates across countries:
3
using a fuel-efficient car (which reduces CO2 emissions per mile), but then driving more miles,
leading to an overall increase in CO2 emissions
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, Laura C / Tilburg University
nations with a default of presumed consent had far higher participation than those requiring
explicit consent.
Even when people make deliberate decisions to change behaviour, they often struggle
to act on them due to limited attention and self-control. This gap between intention and
behaviour can be addressed through decision assistance interventions, which reinforce self-
regulation. Commitment devices are one such tool; they help overcome psychological
obstacles like procrastination. For instance, in the Save More Tomorrow program, employees
who committed in advance to allocating future salary increases to retirement savings
substantially boosted their saving rates. Additionally, reminders serve to make intended
behaviours more salient, helping individuals stay on track.
Key Findings:
Decision structure interventions (altering the arrangement of choices), with an
average effect size of d = 0.54, were more effective than decision information (d = 0.34) and
decision assistance interventions (d = 0.28). Examples of decision structure techniques
include changing choice defaults, option-related effort, range/composition of options, and
option consequences.
Choice architecture interventions are effective at influencing behaviour, with decision
structure changes (like defaults) showing the strongest effects. These interventions are
effective across various behavioural domains (especially food and health) and work in both
lab and real-world settings. However, there may be a decline in effect sizes in more recent
studies, which could signal adaptation or diminishing novelty.
Defaults are a type of choice architecture intervention where a particular option is pre-
selected or automatically chosen unless the individual actively opts for something else. They
are powerful because many people tend to go with the default—either out of convenience,
inattention, or a perception that it’s the recommended choice.
Decision information interventions (increasing information availability and
comprehensibility) had a smaller effect. Techniques include translating information, making
information visible, and providing social reference points.
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