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I know what you are thinking. This sounds like a joke, but it is not. There really is a What-The-Hell Effect and we will get to it in a moment. First let’s talk about the Denomination Effect. Let’s say you are leaving home and want to carry some cash with you. You have the choice of either taking a $20 bill or $20 in smaller denominations. Should this make any real difference to how much you are likely to spend? After all $20 is $20, right? Not quite. Turns out the denomination in which money is carried does have an impact on spending behavior. Two researchers recently published an article detailing the effects and we’ll take a closer look at it here.

Does a person’s physical attractiveness influence their selection of romantic partners? Yes, of course. There is anecdotal and research-based evidence to support that. But there are several related questions that arise and require urgent answers. A group of researchers set out to find some answers using data from the website HOTorNOT.com and some common analytical techniques. Admittedly, this is not the most representative sample in the world, but for this purpose is quite acceptable. Let’s take a look at the questions and the answers.

Is $2.99 the same as $3.00?

Posted by on in Rajan Sambandam

How often do we as consumers see “just below” retail prices such as $2.99 or $29.99 or $299.99? All the time, right? It seems like we rarely ever see “round prices” for anything. The obvious reason why retailers and others do it is because of the belief that the left digit dominates and people are likely to see say, $2.99 as being significantly more than a penny less than $3.00. There are two issues here. The first is whether people actually perceive a difference and the second is whether it has an effect on what they purchase. Both of these issues can be studied experimentally and that’s what two sets of researchers did.

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  • Ed Olesky
    Ed Olesky says #
    Thank you for this! I was thinking it might be a myth. Good to know that some research has been done. I have always rounded up, as

Pizza: Round or Square?

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Let’s say you are following your dream to kick your day job and start a pizza joint. Many consequential decisions need to be made, but one that will certainly affect your production and display process will be the shape of the pizza: round or square? You might have personal preferences, but how will your customers see it? Given the same size, which shape will be seen as a better deal? Questions on package shapes often arise for consumer goods, but while pizza is ubiquitous, its shape has not been systematically investigated until recently. The broad area of inquiry is called psychophysical biases in area comparisons and three researchers considered the shape problem to figure out what a pizza parlor should do.


Expertise: How to get it

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In his most recent book, Outliers, Malcolm Gladwell talks about the 10 year rule -- a minimum of about 10 years (or roughly 10,000 hours) of work is needed to gain expertise in any area. While the idea originates from research in the early part of the 20th century, the rule itself was formalized by Nobel Prize winner Herbert Simon and a colleague based on their study of chess. The definitive review and experimental confirmation comes from a great article in the nineties by the psychologist K. Anders Ericsson (a student of Simon) and colleagues. It is a very interesting article with plenty of information and gets to the basic idea of how to become an expert performer.


Is the Economy Turning the Corner?

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You can find plenty of people who will argue both sides and it can be difficult to disentangle the arguments and the data from personal biases. But what is hard to argue is that most of these discussions can get muddy very quickly unless you are well versed in the intricacies of economic data. What would be really nice is a user friendly (preferably animated) visualization of relevant data that tells us what is happening and is likely to happen. If you are looking for that you are in luck my friend.



I have previously written about Amanda Cox and the excellent graphics team at the NY Times. Well, they have done it again. They have taken a very interesting chart that is watched by OECD economists for changes in the economy and made it significantly better.



Meaning in Work

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There are some occupations (such as doctors, teachers, firemen, social workers etc) where people find meaning or a purpose in their work. And then there are other occupations (you know who you are) where there isn’t quite as much meaning. At least that is the general understanding. Of course, it is possible to find meaning in the most pedestrian of occupations as long as one is able to link it with larger goals such as providing for one’s family. But the question is, can people be made to find meaning in such work even when such nobler goals are unavailable. That is, will the presence of a very simple “purpose” allow people to see work differently even when it appears meaningless on the surface? That’s the question asked by three researchers who answered it with the help of two simple experiments.


Animated Charts

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I like charts that show a lot of information in a simple, elegant way effectively summarizing a large table. Of course, it is nearly impossible to do that without animation. Here is a good example using life tables. You can see how life expectancies changed over the years. The prevalence of infant mortality in the earlier years is particularly clear. Click on the Survival tab to see the life expectancies at various points in time. As an added bonus you can enter your age and see how long your party will last!


Several research papers and a book have been published by Satoshi Kanazawa raising interesting questions and trying to answer them from an evolutionary biology perspective. For other such questions read this article in Psychology Today. Our question of the day concerns beautiful parents and their offspring. Based on his research Kanazawa asserts that beautiful parents have more daughters. Rather than debate the evolutionary basis of such a claim, the Columbia University statistician and blogger Andrew Gelman decided to look at the statistical basis of the claim. What he found has larger implication for general analysis of data.


Instant or Delayed Gratification?

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Let's say you had the choice of giving one of two gift cards. One of them expires soon while the other expires much later. Which would be better to give? The latter, right? Not quite, say some behavioral economists. It appears that the one that expires sooner and therefore avoids procrastination makes people happier. That's right: people procrastinate even when it comes to pleasure. It could be that even with pleasures like using gift cards there are some costs associated (such as arranging for babysitting to go the spa) that loom much bigger in the immediate than in a distant future. So a spa visit in six months seems like a pleasure while one tomorrow looms (somewhat) ominously.


Trouble With Numbers

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A common experience when shopping is to see price discounts expressed in percentage terms. "All items are 25% off". That's easy enough to understand. How about situations where you see signs that say "Take a further 15% off at the register"? This is where complications arise. If an item costs $100 and you see these two signs what do you think is the final discounted price of the item? Multiple percentage changes are often used by stores and for good reason. Recent research shows that consumers are not very good at calculating multiple percentage changes and in fact make predictable mistakes. The researchers show that these mistakes can be rectified in certain ways and that there is a clear economic cost to consumers when such mistakes are made.


Beautiful Charts

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How much do you like it when information is visually conveyed in a very pleasing manner? The New York Times Graphics Department is particualrly adept at this. It is a group of about 30 people with various backgrounds who create the visual representations for the Times publications. The group is mainly composed of cartographers, illustrators and programmers. The graphics editor Amanda Cox is unusual in that she is a statistician. You can see her ability to visualize data in the following examples. The Times graphics group dominated the gold medals at the Malofiej Awards, the most important prize for graphic design. Cox won the gold for Individual Portfolio.

Here are some examples of the group's work. Take your time to look at how simply, yet appealingly these are laid out and the amount of information that is packed in with minimal clutter. The designers have been able to stretch their imaginations in the online edition in ways not possible with the paper copy.


Circles, Squares and Choice

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Can simple shapes like circles, squares and triangles affect consumer choice? In particular, will exposure to simple shape arrays influence how people buy? Simple shape arrays are of the form OOOOΔOO or the form OOOOOOO. The former is called a uniqueness array as there is one shape that is unique and the latter is called a homogeneity (or uniformity) array as all the shapes are the same. Another type of array called a variety array looks like OΔOOΠΔOΠ. So they are quite innocuous. The question is, are they powerful enough to induce behaviors in consumers that correspond to the shapes, such as variety seeking and uniqueness? This idea was tested by two researchers from Stanford University and produced surprising results.


Much as it is with people, there are two ways firms and customers can begin a relationship: one of the two parties can initiate the relationship. With people, who initiates the relationship may have no bearing on the outcome of the relationship (at least none that I know of). With firms and customers it really does make a difference says Paul Dholakia, a researcher at Rice University. It happens at least from the firm's point of view, because of the different behavior exhibited by customers who engage firms on their own, as opposed to being induced to do so.


From Script to Hit

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Recently Slumdog Millionaire won the Oscar for best picture. It’s already considerable box office muscle is going to be further enhanced. But this was a movie that nearly did not get made. The money men who read the script did not think it was a likely candidate for success and hence it had to go through its own harrowing twists and turns to hit the screen. That is not at all an atypical scenario in the world of movies. Predicting box-office success is very difficult. It is difficult even when the movie has been made and pre-screening reviews are available. The task is considerably more difficult when only the script is available for prediction. Someone who decides to plunk down money will have to visualize a lot based on words on paper. In this kind of difficult situation is it possible to make good predictions about the success of a script if one were to take an analytical approach? Yes, say three researchers who have demonstrated a method of doing precisely that.


License to Thrill

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It is generally accepted that purchasing luxury products (ones that provide more pleasure or thrill than utility) is associated with at least some feelings of guilt. This makes it more difficult for manufacturers of products such as expensive cars and designer jeans to sell them, as consumers may have negative feelings and find it harder to justify the purchase. But is this still the case if purchase context is taken into account? Many real world purchase decisions are not made in isolation. The consumer's mindset, the store environment, the state of the economy and other factors influence what is purchased. However, a lot of purchase decisions are studied by themselves without taking into account these kinds of contextual factors. One such factor is the previous choice made by the consumer. In studying this issue with relation to the purchase of luxury products and prior altruistic intentions, two researchers found interesting conclusions.


Books: The Immortal Game

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The Immortal Game: A History of Chess by David Shenk

Chess is not new. Even those who have never played it know enough to recognize the game and its important pieces and terms. But to get a real understanding of its development over time and its influence on all manner of affairs, David Shenk's book is a great place to start. As an excellent science writer and descendent of a legendary chess player he brings great rigorousness and lucid writing to this history of chess. The title is a double entendre that refers to chess itself and a specific game played more than 150 years ago. As Shenk lays out the story of chess in each chapter he also shows, move by move, how that specific game played out, leading to a terrific conclusion.

Precious few of us are completely unbiased. Many of us would like to believe that we are unbiased when it comes to questions of race, gender, appearance etc, and would even say so when asked in surveys. But evidence indicates that at the aggregate level bias is real and prevalent. For instance, research by Marianne Bertrand and Sendhil Mullainathan has shown very clear bias in the selection of candidates for job interviews. They ran an experiment where they sent in resumes to real jobs where nothing was different except for how African-American some of the applicants' names sounded. In spite of equal qualifications, white names received 50% more interview calls. Sadly this was true even for federal jobs where "Equal Opportunity" is explicitly advertised. So, if bias exists but people won't say they are biased, how does one go about measuring it? Cleverly, of course. Here we will discuss two interesting indirect ways of measuring bias: Implicit Association Test (IAT) and Conjoint Analysis (CA).

Sports fans and announcers often talk about hot streaks of particular players - times when a player just can't miss. This phenomenon is supposedly seen in multiple sports and some players are in fact described as "streaky" players. How true is this? Are there hot streaks in sports? Can one objectively test the presence of a streak? Researchers have been looking into this for more than two decades and have found precious little evidence for the presence of hot streaks. At least not anywhere close to the frequency with which the term seems to be used in modern sports. We will take a tour of the pioneering research in this area which used basketball data, as well as some more recent research that spanned other sports. Across the American sports horizon it appears that Joe DiMaggio may have in fact been as special as his legend implies.


Lie to Me?

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On the TV show Lie to Me, the lead character confidently declares that on average people lie three times in a ten minute conversation. He is a deception consultant who excels in reading micro expressions on people's faces to determine if they are lying. This character is based on the renowned psychologist Paul Ekman, whose work revolves around the idea that facial emotional expressions are universal and can be analyzed. He is the scientific consultant on the show and in fact deconstructs each episode in his blog, The Truth Behind Lie to Me. But given that it is a dramatic TV show, Lie to Me focuses on people with strong motivation to lie. Would everyday people with no specific motivation still engage in dishonest behavior when given the opportunity? Apparently the answer is yes given the real cost to the economy of low level dishonesty (returning clothes after wearing, taking office supplies, inflated insurance claims etc) which runs into billions of dollars a year. But what explains this behavior? Interesting answers were found by three researchers who ran a series of experiments to investigate this issue.

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