Elina Halonen, The Irrational Agency, UK
Festival of NewMR 2013 - Main Stage
Locally Irrational
Applying behavioural economics in different cultures
Elina Halonen
Partner and Co-Founder
The Irrational Agency, UK

Why is this important?
Increase in research in Asia and Latin America
Understanding the impact of different cultural contexts on consumers’
decision-making more important than ever.
Culture exerts a powerful influence on decision making and BE
Cultural differences have more diverse and wide-ranging implications
for marketing and market research than just acquiescence bias or
extreme response styles in surveys.
BE is being adopted by researchers across the world
Most of the research we’ve drawn on so far has been conducted in
the US or UK – to what extent can we apply this knowledge globally?
1
2
3

“Global” behavioural economics?
Popular BE literature: “cognitive biases are universal”
“The biggest challenge for our field in the next
10 years would be to understand the generality
of the findings we have. We have been ignoring
culture too much.” Dan Ariely
Source: Interview on InDecision blog (http://indecisionblog.com/2013/08/17/research-heroes-dan-ariely/)
A relatively new and unexplored field: cognitive theories on decision making
rarely consider culture as a factor
…but an increasing body of research suggests that many
biases and heuristics function differently in different cultures!
However, 96% of samples in psychological studies come from WEIRD
countries with only 12% of the world’s population: a randomly selected
American is 300 times more likely to be a research participant than is a
randomly selected person from outside of the West!

Culture as a psychological lens
No generally accepted definition of culture
Most often we think about the impact of culture through social aspects
But surely at least the purely
cognitive aspects of decision
making are the same
everywhere?
Focus on a certain aspect depending on
the specific area of interest
Often defined through e.g. values, social
norms, rituals, beliefs, attitudes…

Which one is longer?

How WEIRD!
Strength
of the
illusion

Is it just anecdotal evidence?
Time/hyperbolic discounting in 45 countries
Differences related to wealth and education + cultural factors (individualism,
uncertainty avoidance, importance of tradition) as well as time concepts
(linear/cyclical)
Encoding of time in language and intertemporal choice in 76 countries
Speakers of languages that grammatically associate future and present save
more, retire with more wealth, smoke less etc.
Economic, social and linguistic
environments strongly shape people’s
behaviour, motivations and
preferences

What makes us different from each other?
In fact, there are some measurable differences between cultures which do
affect how a person’s cognition works while they make decisions.
1. Self-concept: individual/collective
2. Information processing style: holistic/analytic
3. Other effects such as difference in time perspective
1
2
3
These make the BE biases work
differently in different countries.

It’s a bi-polar world
Individualism Collectivism
• detachment from relationships and
community  self relatively independent
from others
• relationships, roles and status within
the social system important  self
inseparable from social relations
• self-view defined through
internal attributes such traits, abilities,
personal values and preferences
• behaviour seen as under control of
the individual, arising from internal
attributes
• self-view defined through
relationships with others
• behaviour not seen as a reflection
of internal traits

The self as a lens
Self-concepts shape how we see the world
Organize information, direct attention to relevant information, shape
motivations, influence emotional experiences, etc.
A continuum between two poles: independent and interdependent
Self‐contained individuals, autonomous agents consisting of their attitudes,
personality traits, and abilities?
OR
Interpersonal beings, intertwined with one another in social webs, with
role‐based obligations towards others?
Where people find themselves on this
continuum has significant
consequences for a variety of
emotions, cognitions, and motivations.

Self-enhancement & choice
Choices reflect our values, assumptions and shared meanings
Choice as an individual endeavour and reflection of inner attributes vs. an
act that takes other people into account and says little about the chooser?
Cultures have different assumptions about uniqueness
In Western contexts, uniqueness is good and choice is almost a duty
In Western contexts, choice is an act of
self-expression and inherently good
If you value uniqueness you want to see yourself as different from others
Differentiation from others through displaying
variation in choices

Diversification bias & variety-seeking
When choice is an act of self-expression, it becomes important
Psychological impact of lack of choice or failed choice is larger, which
leads to strategies such as variety-seeking
People have a tendency to seek variety in both what and how they choose
…or so says research conducted in Western cultural contexts!
In collectivistic cultures choice is often an interpersonal task
The success or failure of making a choice that portrays oneself in the most
positive light not as big a concern  weaker tendency to seek variation in
choice
Variety-seeking is related to a desire to express
the uniqueness of internal attributes which is
stronger in Western contexts – same
assumptions may not apply elsewhere!

Extended self & the endowment effect
Owners (potential sellers) to value objects more than potential buyers do
Simply owning an object enhances its perceived worth – or does it?
Almost all endowment effect research conducted in the West!
Ownership activates an association between an object and the self
I value myself  I value this object = self boosts the object’s value
Influenced by the degree to which self-enhancement is culturally valued
East: lesser degree of self-enhancement  mere ownership doesn’t
enhance an object’s value
Larger endowment effect in West than East!
Sales tactics such as free trial may be less
effective in these cultural contexts

Tunnel Vision vs. Wide Angle
Analytic Holistic

You get what you pay for… or do you?
Price is as a signal of quality – a true marketing universal?
Research in Western countries suggests few cultural differences
Price influences consumers’ quality judgments
Price traditionally seen as extrinsic cue – separate from elements like the
product, its design or ingredients
Consumers in certain cultural contexts will
evaluate products more holistically, which
enhances the effect of framing a decision in a
particular way
New research: self-concept can influence the strength
Interdependent self-concept linked with a tendency
to evaluate products more holistically, making price
a much stronger cue for quality!

Sunk cost effect across the world
A commonly observed fallacy where goods or
opportunities are valued not according to their
future benefits but according to the resources
previously consumed to acquire them.
Past investments in time/money that have
already been incurred and cannot be
recovered.
Sunk costs are…

The experiment
Assume that you have spent £36 on a ticket for a concert by
artist X.
Several weeks later you buy a £18 ticket to a concert by artist
Y. You think you will enjoy the concert by Y more than the
concert by artist X. As you are putting your just-purchased
ticket for Y's concert in your wallet, you notice that both
concerts are on the same night! It's too late to sell either
ticket, and you cannot return either one. The tickets are not
transferable so you cannot sell one.
You must use one ticket and not the other. Which concert will
you attend?
Experiment amended from Arkes & Blumer (1985)

Where’s the effect?
Overall, different result to original study
Different sample – not undergraduates
and not just US
More people may have learned about
the sunk cost effect since the original
study
54%
32%
46%
68%
ARKES &
BLUMER
(1985)
OUR
EXPERIMENT
Shows
SCE
Does not
show SCE
Base: Arkes & Blumer (n=61), our experiment (n=4800)

Variance between countries
54%
46%
45%
39%
30%
26%
25%
25%
23%
23%
22%
0% 10% 20% 30% 40% 50% 60%
Brazil
India
SA
Mexico
UK
US
Spain
Germany
Russia
Sweden
China
Clear differences between countries -
what links India, Brazil, Mexico & South
Africa? No measured psychological
scale clearly explains this effect!
Some link with GDP/head + strong,
correlation with fixed investment/capita.
Vicious circle: certain decisions and
decision styles might create cultural and
economic trends which in turn
perpetuate the same types of decisions?
In other words: we can’t assume that
these biases work similarly or are
equally strong in different cultures.
% showing SCE
Base: n=c.400/country

From non-rationality to non-universality?
Understanding cultural influences on thought is crucial for everyone
attempting to accurately describe and predict consumers’ decision making.
BE findings and theories might be universally applicable, but in-depth
knowledge of the specific cultural context is crucial for effective applications.
However, cross-cultural research in BE is in its infancy – no “off-the-shelf”
solutions exist yet so requires extensive understanding of the potential
impact of culture on decision making!
1
2
3
As we gradually abandon the error of rationality and
adopt more principles from behavioural economics,
let's make sure we don't entrench a new mistake:
universality

THANK YOU!
Elina Halonen
Partner & Co-founder
The Irrational Agency
www.theirrationalagency.com
@irrationalagcy @infomagpie

Q & A
Sue York
NewMR
Elina Halonen
The Irrational Agency, UK

Festival of NewMR 2013 Sponsors and Supporters

Recommended

Recommended

More Related Content

Similar to Festival of NewMR 2013 Sponsors and Supporters

Similar to Festival of NewMR 2013 Sponsors and Supporters (20)

More from Ray Poynter

More from Ray Poynter (20)

Recently uploaded

Recently uploaded (20)

Festival of NewMR 2013 Sponsors and Supporters