Consumer protection is key, according to the White House. From giving mobile users greater choice over where they get their apps to banning surprise “resort fees” foisted on would-be vacationers at the last second, federal initiatives span across consumer-facing markets and dozens of agencies. The idea is that removing irritants that consumers face will improve market competition.
As experts in behavioral economics, the field of research underpinning these initiatives, we agree.
How Studying Behaviour Can Lead to Better Practices
Behavioral economics explains how and why we actually take notice of information—undercutting the claims of companies that we are reading all the Terms and Conditions, for example. It shows how even small changes to the way that companies present choices can make us behave in ways that pad their profits.
Pop-ups telling us how many people are looking at the items in our baskets. Timers counting down in the background. Subscriptions with no cancellation button to be found. Or the bottomless feeds and auto-playing videos that keep us hooked on scrolling for just a few minutes more. These are known as “dark patterns” or, in the words of the White House, “manipulative design techniques.”
By carefully studying behavior we can tease apart these techniques, show the harm they can do, and suggest a better way forward. We’ve seen this firsthand in our work.
Take DIY stock trading apps aimed at first-time investors. Many of these apps turn investing into a game-like experience. Elements like reward points or animations celebrating completed trades keep users engaged.
When our organization created a simulated trading platform, we found that giving people the chance to earn valueless reward points increased trading volumes by 40%—behavior that is not likely to benefit users.
It’s not just investors who are at risk.