Would predicting peoples’ choices get any easier if we understood behaviour?
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Transcript of Would predicting peoples’ choices get any easier if we understood behaviour?
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Would predicting peoples’ choices get any easier if we understood
behaviour?
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With a little help from my friends
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Daddy, what do you really do at work?
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… other questions I’ll try to answer• Why do we want to understand and predict choices?
• Why is this especially important and challenging now?
• How do we do it?
• Who is doing this, and are we the right people?
• Do we do it the right way?
• What can we learn from behavioural economics?
• What are the challenges and opportunities?
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Why do we want to understand and predict choices?
Why is this especially important and challenging now?
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Need understanding and prediction of demand
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Some big decisions are needed
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Making choices in a difficult climate
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Life is more and more digital
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… and more international
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How do we do it?
Who is doing this?
Are we the right people?
Do we do it the right way?
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First we observe choices, then …
Valuation of individual
components and overall valuation
Forecasting of choices/demand
in specific scenarios
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(A selection of the) leading modellers
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We often treat choices in isolation …
Short term vs medium term
vs long termTransport vs energy vs health ….
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… and generally look at individual people
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Reality is more complicated
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Are we modelling the right things?
Transport dominates, but main emphasis on short term choices
Other fields are catching up
Long term choices under-researched
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There are other experts on behaviour!
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The BBC’s love of Daniel Kahneman
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System 1 vs system 2 – fast vs slow
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A new dawn?
• “… synthesize a new behavioral science of pleasure [extending] into areas of individual sensation of well-being and choice in the context of social network information and approval …”
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Do these theories apply in real world behaviour?
Or in hypothetical choices?
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Modelling not just for the sake of it
vs.
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Zero cost: Ariely chocolate experiments
$0.15 73% $0.01 27%
$0.14 31% $0.00 69%
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… an example from real life
£0 to £5 £5 to £8
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… and it happens in SP too
Option with lowest toll chosen
Willingness to pay higher toll for reduced slowed
down timeNo zero toll option 40.6% AUD 13.2/hr
Zero toll option available 74.7% AUD 11.9/hr
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Framing & mental accounts
time vs cost (p/min)
safety vs time (min/ 1000 inj)
safety vs cost (£/ 1000 inj)
direct valuation 11.07 42.75 3.34
inferred 7.81 30.15 4.73
bias in inferred -29.47% -29.47% 41.79%
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Anchoring: real life cost referencing
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… similar effects in value of time work
Base model: 22.28DKK/hr
With anchor (at mean):
26.95DKK/hr
Route 1 45 minutes 25 DKK
Choose route 1
Route 2 37 minutes 31 DKK
Choose route 2
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Choice sets can influence the choices
Online only Print onlyPrint & online
16% 0% 84%
68% removed 32%
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… we tend to ignore this in modelling
WTPlarge vs compact, only one fuel type available $1,638
large vs compact petrol, large hybrid available $5,963
large vs compact hybrid, large petrol available $14,731
… predictably irrational?
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Losses are more painful than gains
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… but reality is complex
Date Toll Vehicles per dayAugust 2005 (opening) AUD 3.5 20KOctober 2005 AUD 3.5 23KNovember 2005 (free month) free 50.5K (+27.5K)December 2005 AUD 3.5 26.5K (-24K)March 2006 (half toll) AUD 1.75 34K (+7.5K)July 2006 AUD 3.5 30K (-4K)
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Does it matter?
What are the challenges and opportunities?
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Does a richer individual representation make much overall difference?
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Observation/understanding vs prediction
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Is SP (or other experimental) data valid?
Thurstone (1930s): hypothetical choices
Wallis and Friedman (1942):
“The responses are valueless because the subject cannot know how he would react.”
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Best (& big) data often not accessible to us
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What should we do next?
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Lots of exciting things are happening already
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Let’s not kill RUM yet!
Ho
w m
uch
I r
eg
ret
my
de
cisi
on
Distance travelled on a roller coaster
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Build bridges
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Would predicting
peoples’ choices get
any easier if we understood behaviour?
No, but it would
be more
interesting,
challenging,
and maybe
better
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Questions