This blog contains an eclectic array of tidbits of my life. As a behavioral economist, I write about preferences, beliefs, gender gaps, persuasion, and other topics. I also post about my other passions: Taekwon-do, food, fashion, and travel. Finally, as a working mom, I am forever seeking that elusive balance between parenthood, career, and hobbies.
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How choices change behavior
Finally, a relaxing mini-vacation! Just Mike and I in Aruba –
a place that holds many nostalgic memories for us, including one very special
marriage proposal 14 years ago (can it be that long ago???). With all the
tranquil beauty of the sea, the beach, the perfect sunsets, one naturally
reflects on … optimality of choices? Yes, when the “one” is an economist.
Here is a dilemma for you. Upon arrival at our hotel, the front
desk clerk makes us an offer to upgrade to the club level. The freebies include: continental breakfast,
light lunch, hors d’oeurves and desserts in the evening, unlimited wine and
top-shelf liquor throughout the day, and a daily spa “activity” which no one
could explain to us. There is also some less exciting stuff like daily laundry
and pressing, concierge service, and free internet (which is already free for
all guests J).
The cost at face value: $300 per day for the two of us (a “discount” from the
normal rate of $400 per day). What would
you do? Well, let me add another piece
of information that perhaps shouldn’t be relevant if you are totally rational,
but might matter for everyone else: if we don’t do the club upgrade, our hotel
stay is free. That’s right: we are staying here on points, and with our status we
also already got a sweet upgrade to a suite with ocean views.
Here is the rational approach. Breakfast at the hotel would cost around $20
per person, lunch around $60 per person, and excluding dinner (which we planned
to eat off the resort) drinks and dessert around $50 per person. That gives
$260 total value, which doesn’t include the spa treatment whose value is uncertain,
but probably more than $40 for two people. Sounds like the $300 price tag might
actually be worth it. Also, once paid, the $300 becomes a “sunk cost” and
should not affect subsequent decisions. For example, if we had already decided
to do dinners at restaurants off the resorts, the fact that we paid for the
club level should not change our mind to eat there.
But Mike and I are rational enough to know that we aren’t
actually rational. The choice to upgrade to the club level would change our
in-the-moment behavior. Firstly, we typically don’t eat breakfast, but having
committed to the club level would be “forced” to go. Now I love breakfast food,
so I would definitely get extra enjoyment from the experience in the moment.
But then would come the regret from overeating.
We would also probably end up overindulging in desserts and drinks
because we would be similarly trying to extract maximum value from our club-level
upgrade. This might actually decrease our enjoyment we would get from exploring
different restaurants and local bars.
The second consideration is that paying for the upgrade messes
with the feeling that we are getting our vacation “for free.” This also is a
thoroughly irrational way of thinking. Of course, without the club upgrade, we
are still going to pay for all our meals.
But because we obviously have to eat whether or not we are on vacation,
paying for those meals doesn’t feel so painful. On the other hand, paying for
the club is dissociated from regular meals and feels like an “extra” expense. Furthermore,
at the moment of the decision to upgrade to the club level, those payments feel
remote – in a distant future – while paying $300 a night for the club is in the
present. In behavioral economics, we
call this “present bias” which distorts intertemporal decision-making.
So, we didn’t upgrade. And that decision set us on a
completely different path to actions relative to the path we would have taken were
we to pay for the club. I am still
happily caffeinated in the morning with the free in-room coffee, but we are
sticking to the no-breakfast rule. Instead of sending a wrinkly dress to the
overpriced pressing service, we hung it up in the shower and the humidity
successfully took the wrinkles out. We
are also getting enjoyment from the idea that our vacation is still “free”
(which is awesome, despite the fact that, of course, it is not because we’re
still paying for pricey food and drinks).
And yesterday night we visited a favorite restaurant of ours from the
trip when we got engaged, Papiamento, without any regret that we were forgoing
free food at the club lounge!
In about two weeks, a new cohort of college graduates will
don their caps and gowns and receive their college diplomas.The speakers on the podium will undoubtedly
talk about their accomplishments: the knowledge gained, the awards and
accolades attained, and the life-changing experiences had. The speakers will
also talk about the big challenges these graduates might face as they enter the
world beyond the safety of their Alma Mater: issues like climate change, mass
shootings, discrimination, and geopolitical tensions around the world.I will sit among my faculty colleagues, as proud
of my students as can be, all the while thinking about the small challenges.
Small challenges of everyday life can loom larger and take
up more energy and time than you anticipate as a college student. If banks are only open 9-4PM and you have to
work 9-5, when do you go? (Set up online banking ASAP.) Same goes for any doctor’s appointment. Even if you don’t have to fix the kitchen
sink or the AC b…
Gender gaps in representation at
senior levels in the workforce are widespread, especially in academia.One possible explanation is that women just
find it harder to say “no” when asked to do extra ‘stuff’ that detracts from
research and is undervalued at the time of promotion.Indeed, women tend to perform more
service than male faculty. Studies show
that women also on average spend more time on teaching-related activities and
advising students, while men spend more time on research.A clever experiment
reveals that women are twice as likely as men to volunteer for tasks that are
deemed by all as undesirable yet benefit of the group as a whole (service and
advising are commonly thought of in academia as examples of these so-called ‘non-promotable’
It is true that a typical
academic derives little to no pleasure from administrative work or from
interacting with students. In fact, at many research-oriented institutions
putting effort into teaching is discouraged.Once, when I was a …
I can hardly believe it: last
week marked the 10-year anniversary of my becoming a faculty member at Wellesley
College.Over the last decade, I’ve
coached countless students through health crises, anxiety over recruiting for
jobs, striking the right school-life balance, and struggling over seemingly
impossible problem set questions.But no
concern looms larger for Wellesley college students than their angst over
grades. Grade anxiety isn’t just a
Wellesley thing, of course. Yet the extreme extent to which grades define student
experience at Wellesley has always bothered me, and never more so than now.
Only at Wellesley would a student show up in her professor’s office after an exam not
to argue about her grade, but rather to apologize for disappointing the professor.
Oftentimes that “bad” grade is a B+! More importantly, it seems
like this self-defined “bad” grade is viewed as more than just academic
weakness. Students see it as a failure in life in general – a profoundly