There are Free Lunches Statement of Intentions

There are Free Lunches: Behavioral Clues to Live Happy in the Economic World is a blog that intends to present updated and relevant information about the "hidden" and only recently uncovered dimensions of the economic science: the behavioral factors. With this blog we intend to promote in Europe and in the rest of the World, the top research articles and perspectives on behavioral economics, decision making, consumer behavior, and general behavioral science. We aim to be followed by journalists, academics, managers, civil servants, and everyone who wishes to improve their daily interaction with the economic world and consequently, their lives' happiness.

Friday, 22 July 2011

How Psychological Tricks can Keep People from Being Killed on the Tracks

The suburban rail system in the Indian megalopolis of Mumbai is best visualized as two slim arteries cutting through a crowded peninsula. On a map, the Western Line runs due north; the Central Line begins similarly, then wanders away into the city’s northeastern parts. These two lines and a couple of adjunct capillaries, making up a rail network dating back to 1857, carry roughly 7 million commuters a day, some of them over distances as long as 75 miles.
Every mile of this network runs through dense pockets of population, houses, and buildings; these are often just yards away from the tracks, separated at best by a low wall. Sixty percent of the length of the Central Line, for instance, has slums on either side. At rush hour, trains barrel through every couple of minutes, and pedestrian bridges over the tracks are rare. As a consequence, the most popular way for pedestrians to get between east and west Mumbai is to dash illegally over unguarded sections of the tracks.
The consequences are often fatal. On average, 10 people die daily by being hit as they’re crossing the tracks. Track trespassing is the largest everyday cause of unnatural deaths in Mumbai.
For just over a year, however, an experiment at Wadala station, on the Central Line, has been hinting at unorthodox solutions to this problem. On the surface, the experiment involves small, odd changes. Certain railway ties have been painted bright yellow; a new kind of signboard has been installed near the tracks; engine drivers have modified the way they hoot their warning whistles.
This modest tinkering has had dramatic results. In the six months before the experiment went live in December 2009, Wadala had recorded 23 track-crossing deaths, said M. C. Chauhan, a manager with the Central Railway’s Mumbai division. Between January and June 2010, that number had dropped to nine; in the next eight months, up until February 2011, only one death was registered. “We think the project is a huge success,” Chauhan said.

You can check everything about this BE intervention here, if you have 10 minutes:

Sunday, 10 July 2011

Pay-What-You-Want Pricing and Charitable Giving (Via Stanford Center for Social Innovation)

In this quarter’s column, we explore “shared social responsibility” — the idea of companies working in tandem with charities and customers to support socially beneficial causes.

One way this can work is illuminated in a recent study co-authored by Leif Nelson, an associate professor of marketing at the Haas School of Business at UC Berkeley. Nelson and his colleagues have shown that when customers are allowed to pay what they want for a purchase, and — this is key — when they simultaneously know a portion of their money will go to a specific charity, they offer substantially more than they would without the involvement of the charity.

It turns out that just offering a product at a fixed price and telling customers that a certain percentage of their purchase will go to the charity doesn’t stimulate as many sales — and therefore doesn’t raise as much money as hoped. Yet this is the most common charitable promotion consumers see.

Interestingly, the study reveals that letting people pay what they want, combined with a promise that some will go to charity, produces even more profit than selling them a product at a regular, fixed price — whether that price has a charity offer attached to it or not. It also produces a surplus that can go to the charity itself. This type of co-participatory pricing scheme, then, is an ingenious way of stimulating both philanthropic giving and increased sales — a win-win for everyone.

If you have 5 minutesyou can check this insigth to the "honest bar" phenomena here:

Answer to Lydia

Hi Lydia,
It really resemble a social psychology experiment, reason why I decided to amplify it ;)
According with one of the reception employees it worked well, with the
gains from not paying an extra employee and the turists satisfaction surpassing the
small costs from people who consumed without paying.
I agree tha the fact it was a small community of turists, having a good time and establishing a
positive exchange with the villages resort also played a role.
Thanks for your comment, Diogo

Tuesday, 5 July 2011

"Honesty Bar"

While in vacations at the beautiful island of Madeira (I truly recommend it), I was amazed by the pools' bar management philosophy. It was called the "Honesty Bar" and it had no waiters! Besides that it had everything else a normal pool bar can have: fresh drinks, all sorts of snacks, chocolates and candies, bread, cheesse and ham that you can use to make a toast. It had also the several devices used in similar bars such as a coffee machine, ice refrigerator, and a toaster. Most impressively, it had a small safe-deposit box with a considerable amount of money, which you should use to pay for your consumption (all the items had a price indication) and do the changes yourself. At the same time, you should also indicate in a sheet of paper what was your consumption, how much did you pay, and what was your appartment number. Did it work? I would say I don't know for how long does it last, but by the amount of money there was in the box when I payed for my cheese and ham toast and "Brisa Maracujá" (passion fruit drink typical from Madeira), and a considerably filled sheet of paper, it worked perfectly!!
The question is, why did it worked? Or why would it not work in another context? Is it the vacation mode? The fair transaction happening between the turist and the appartments village? The fact that it was occuring within a small community of turists?
I think answering these questions would be an interesting exercise to understand the puzzle between altruistic and egoistic economic behavior.

Monday, 4 July 2011

Management Science, one of the Most Important Management Journals, opened a Behavioral Economics Department (via SJDM mailinglist)

Given the tremendous growth and importance of behavioral economics research and building on the success of our Behavioral Economics and Finance Special Issue (which is scheduled to appear in the January 2012 issue), we have created a new department in Management Science: Behavioral Economics
We provide below our editorial team, the editorial statement for the department and information about Management Science.
Department Editors:
Uri Gneezy, University of California, San Diego
Teck-Hua Ho, University of California, Berkeley
John List, University of Chicago
Associate Editors:
Nick Bloom,Stanford University
Colin Camerer, California Institute of Technology
Jeffrey Carpenter, Middlebury College
Gary Charness, University of California, Santa Barbara
Yan Chen, University of Michigan
Anna Dreber, Stockholm School of Economics
Simon Gaechter, University of Nottingham
Stephan Meier, Columbia University
Klaus Schmidt, Univeristy of Munich
Andrew Schotter, New York University
Uri Simonsohn, University of Pennsylvania
Matthias Sutter, University of Innsbruck
Chad Syverson, University of Chicago
John van Reenen, London School of Economics
Roberto Weber, University of Zurich
Editorial Statement:
The Behavioral Economics Department seeks to publish original research broadly related to behavioral economics. We welcome laboratory experiments, field studies, empirical and theoretical papers. The goal of the Department is to promote research on incentives and behavior in domains such as markets, groups and individual decision making. In the cross-disciplinary tradition of Management Science, we encourage research that draws ideas from multiple disciplines including economics, psychology, sociology, and statistics to provide novel insights on behavioral economics. In all cases, manuscripts should provide high quality original approaches to behavioral economics, should be motivated such that the importance of the results are clear to nonspecialists and have important managerial implications for business and public policy.