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Monkey Business

Monkey Business



Slide set used in Lightningtalk at XP2010 regarding the topics Loss Aversion and the Endowment effect.

Slide set used in Lightningtalk at XP2010 regarding the topics Loss Aversion and the Endowment effect.



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  • Two persons, A and B, sellingfruit to themonkeyExperiment 1: A always displays one piece offruit, butsometimesadds an extra pieceB always displays two pieces offruit, butsometimesremovesoneofthemResult:Subjectsprefer A Theyprefer bonus over loss
  • Experiment 2:A always displays one piece offruit and gives itB always displays two pieces offruit, butalwaysremovesoneResults: Subjectsprefer A B was a ”sure loss”

Monkey Business Monkey Business Presentation Transcript

  • Monkey Business( a short story about loss aversion and theendowmenteffect )
    Haakon Spilde (hfs@knowit.no)
    XP2010 Trondheim
  • References
    M. Keith Chen, VenkatLakshminarayanan and Laurie Santos. “How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior”Journal of Political Economy, 2006, vol. 114, no. 3
    Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler. “Anomalies: The Endowment Effect, Loss Aversion and Status Quo Bias”, Journal of Economic Perspectives, 1991, vol. 5, no. 1
  • Loss Aversion
    The asymmetry between the evaluation of gains and losses
  • Source: http://en.wikipedia.org/wiki/File:Capuchin_Costa_Rica.jpg
  • CaphucinMonkey (Cebus apella)
    Good subjects since they are similar to humans in many ways:
    • Closely related evolutionary
    • Quick and adept problem solvers
    • Skilled tool users
    A single alpha-male and several sub-alpha-males and females normally live together, with the alpha-male holding sexual monopoly over the females within the group
  • Experiment: sometimes
  • Experiment: always
  • All subjectshated a ”sure loss” the most
  • Endowmenteffect
    The asymmetry between the amount that a given individual would like to pay for a certain good and the amount that this individual would like to accept to sell the same good.
  • A few ideas on situations in software development where this knowledge may be useful
  • Take away points
    • “This is not finished”
    • This means you gave 2 bananas and took one back
    • “If you want to add this feature, you have to remove another”
    • This implies giving one banana back. Also the one being given back is worth more.
    • Development in iterations and detailing as late as possible are ways to decrease the impact of loss aversion and the endowment effect.
    • Less likely you have to give bananas back and you are making sure that only a few bananas are given at a time.