Behavioural business: the psychology of decisions in economy, business and policy contexts, 2022

This book explores all aspects of the new and emerging area of behavioural business. This book identifies behavioural business as a powerful application of the latest insights and tools from psychology and behavioural science to decision-making in business, management and policy. This book uniquely positions behavioural business as different from both behavioural economics and psychology. This book instead applies a fresh focus on behavioural interventions in policy and business. This book introduces this new area and showcases what it contributes to a number of important contemporary business and policy issues. These include behavioural insights for managers in diverse and multi-cultural workplaces, designers of organisations, interventions, products and services, financial advisors, public policy makers, business creatives and entrepreneurs as well as charity and NGO practitioners. This book summarises state-of-the-art knowledge in the areas of expertise of the authors, who are members of the Behavioural Business Lab at RMIT University in Australia. This book will interest advanced students in related subjects as well as academics and policy makers hoping to learn and apply behavioural insights to their areas of expertise. Contents 5 Contributors 7 Part I Background 8 1 Behavioural Business: The Psychology of Decisions in Economic, Business and Policy Contexts 9 1.1 Behavioral Business 9 1.2 What Does Behavioural Business Scholarship Entail? 11 1.3 RMIT University's Behavioural Business Lab 12 1.4 Scope of the Book 16 References 19 2 Introducing Behavioural Business 20 2.1 Introduction 20 2.2 A Science of the Social 21 2.3 A Process of Professionalisation 22 2.4 Self-Perpetuating Hyperspecialisation 24 2.5 Disunity and Its Discontents 25 2.6 The Promise of Consilience 27 2.7 Institutionalising Integration 28 2.8 The Behavioural Revolution 30 2.9 Engaged Scholarship 32 2.10 Discussion 33 References 35 Part II Concepts and Approaches 39 3 Culture and Economic Behaviour: Evidence from an Experimental-Behavioural Economics Research Programme 40 3.1 Introduction 40 3.2 Culture 41 3.2.1 The Behavioural Approach to Culture 41 3.2.2 Ch03:triandis95' Individualism-Collectivism Dimension 42 3.2.3 Ch03:hofstede84's Cultural Dimensions 43 3.2.4 Ch03:schwartz02' Universal Human Values 44 3.2.5 Ch03:inglehart97's World Values Survey 48 3.2.6 Ch03:ccc87's Chinese Culture Connection 50 3.3 Economic Behaviour 51 3.3.1 The Trouble with the Classicists 51 3.3.2 Behavioural-Experimental Economics 53 3.3.3 Experimentally Measured Economic Behaviour Types 56 3.4 Five Effects of Culture in the Economy 60 3.4.1 Research Approach 63 3.4.2 People From Different Cultures Behave Differently 66 3.4.3 People From Different Cultures Are Treated Differently 68 3.4.4 People From Different Cultures Have Different Values 70 3.4.5 People's Cultural Values Shape Their Behaviour 72 3.4.6 People From Different Cultures Are Stereotyped Differently 74 3.5 Three Issues With Culture for Economic Policy 75 3.5.1 Culture Matters, but How Much? 76 3.5.2 Culture Exists, but at What Level? 76 3.5.3 Culture is Learnt, but to What Extent? 78 References 79 4 The Detective Mindset: Forensic Approaches to DetectingBehaviour 85 4.1 Introduction 85 4.2 General Principles 86 4.2.1 Normative Expectations versus Positive Observations 86 4.2.2 Follow the Money 87 4.3 Case Study I: Political Corruption 87 4.4 Case Study II: Racial Bias in Capital Sentencing 91 4.5 Case Study III: Do Governments Lie About Official Statistics? 94 4.6 Conclusion 96 References 97 5 Gender in the Workplace 99 5.1 Introduction 99 5.2 Gender Differences in Behavioural Preferences: Risk, Competition and Altruism 102 5.2.1 Risk Preferences 102 5.2.2 Preferences Towards Competition 103 5.2.3 Social Preferences 105 5.3 Gender Differences in Other Psychological Attributes and Non-cognitive skills 106 5.3.1 Negotiation 106 5.3.2 Confidence and Self-Promotion 108 5.3.3 Personality Traits 109 5.4 Gender Stereotypes and Discrimination 110 5.5 Summary 111 References 112 6 Behavioural Business Design 116 6.1 Introduction 116 6.2 Behavioural Economics-Based Design 119 6.3 Human-Centered Design for Behaviour Change 122 6.4 Summary 126 References 128 7 Behavioural Organisational Strategy 130 7.1 Introduction 130 7.2 Behavioural Theory of the Firm 131 7.2.1 Goal Setting 131 7.2.2 Forming Expectations 132 7.2.3 Making Decisions 132 7.3 Employee Strategy 133 7.3.1 Attracting Employees 133 7.3.2 Motivating Employees 133 7.3.3 Employee Interactions 134 7.4 Consumer Strategy 135 7.4.1 Consumer Biases 135 7.4.2 Ethical Concerns 136 7.5 Competition Strategy 137 7.5.1 Collusion 137 7.5.2 Price Wars 138 7.5.3 Behavioural Antitrust 138 7.6 Overcoming Biases 139 7.6.1 Organisational Biases 139 7.6.2 Overcoming Biases 140 7.7 Summary 142 References 142 Part III Applications 144 8 Charitable Giving for International Development: Insights from Behavioural Economics and Other Disciplines 145 8.1 Introduction 145 8.2 The Approach of Empirical Studies 146 8.3 Altruism Versus Egoism: The Continuum of Motives for Donating to Charity 147 8.3.1 Pure Altruism 147 8.3.2 Pure Egoism 148 8.3.3 Impure Altruism 148 8.4 Other Motivations for Charitable Giving 149 8.4.1 Effective Altruism 149 8.4.2 The Identifiable Victim Effect 151 8.4.3 Positive Versus Negative Appeals 152 8.4.4 Happiness and Charitable Giving 152 8.4.5 Social Information and Social Pressure 153 8.4.6 Time Preferences and Reminders 154 8.4.7 Matching Gifts 155 8.4.8 Recognition 155 8.5 Conclusion 156 References 157 9 Unite and Conquer? Behavioural Pitfalls in Australia's Response to COVID-19 160 9.1 Introduction 160 9.2 The Australian Context 161 9.3 Persuasion and Influence: How To Use Behavioural Science To Deliver the Message 162 9.4 What Matters in Getting Citizens To Act? 165 9.4.1 Optimism Bias and Risk Aversion: Not Getting Caught 167 9.4.2 Crowding Out Intrinsic Motivators 168 9.5 Crisis Management and Government Credibility 169 9.5.1 Trust and Accountability 169 9.5.2 Dealing with Political Polarisation 171 9.6 Case Study of the Anti-Maskers: How To Motivate Those Not Conforming 171 9.6.1 Cooperation and Dissent 173 9.6.2 Need to Express Dissent 174 9.7 Summary 174 References 175 10 Unlocking Creativity for Business Potential 177 10.1 Introduction 177 10.2 What Makes a Creative Organisation? 179 10.2.1 Determinants of Individual Creativity 179 10.2.1.1 Expertise 179 10.2.1.2 Creative Thinking Styles 180 10.2.1.3 Motivation 180 10.3 Leveraging Individual Creativity at an Organisational Level 181 10.3.1 Valuing a Creative Mindset to Gain a Competitive Edge 182 10.3.2 Embedding Creativity within Business Workplace Culture 183 10.3.3 Rewarding Creativity Regardless of Pay-Off 183 10.3.4 Own Creativity to Make it Part of Brand and Organisational Identity 184 10.4 Summary 185 References 185 11 Behavioural Aspects of Financial Advice 188 11.1 Introduction 188 11.2 Behavioural Research on Financial Decision Making 189 11.2.1 Disposition Effect 189 11.2.2 Home Bias 191 11.2.3 Mental Accounting 192 11.3 Behavioural Research on the Adviser and Advisee Relationship 194 11.3.1 Conflicts of Interest 194 11.3.2 Disclosure 195 11.3.3 Persuasion 197 11.4 Summary 197 References 198 12 Behavioural Aspects of the Real Estate Market 201 12.1 Introduction 201 12.2 The Market Mechanism 204 12.3 Sellers 205 12.4 Buyers 208 12.5 Real Estate Agents 211 12.6 Conclusion 212 References 213 Index 215