Monkey Business

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.

Monkey Business

by haakonfs

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