Focusing and Economic Decision Making
Traditional economic models typically assume that individuals are rational and have stable preferences over outcomes. Recently, a more complicated account of economic decision making has emerged. One vein in this development is the recognition that people have limited cognitive capabilities. Indeed, it is often hard to consider, and properly evaluate, all aspects of the available options. This leads people to focus on certain attributes. For example, a consumer may focus on differences in prices rather than quality, when one of the goods is sold at a discount. Similarly, a person may pay too much attention to the immediate costs of going to the gym at the expense of the more diffuse future benefits. In fact, such focusing effects could cause many well-known choice biases.
Our aim is to understand the factors that shape the focus of the decision-maker. We will test for such focusing effects using experiments and eye-tracking technology. We will also match experimental data with household data to investigate how focusing relates to decision making in important contexts, such as retirement savings and health activities.
Understanding the relevance and determinants of focusing are also of importance for policy making, since it may suggest how choices can be amended simply by shifting the focus of the decision maker. Similarly, firms may exploit these effects to shroud or highlight certain attributes which may have implications for competition and welfare on markets.
Our aim is to understand the factors that shape the focus of the decision-maker. We will test for such focusing effects using experiments and eye-tracking technology. We will also match experimental data with household data to investigate how focusing relates to decision making in important contexts, such as retirement savings and health activities.
Understanding the relevance and determinants of focusing are also of importance for policy making, since it may suggest how choices can be amended simply by shifting the focus of the decision maker. Similarly, firms may exploit these effects to shroud or highlight certain attributes which may have implications for competition and welfare on markets.
Final report
FINAL SCIENTIFIC REPORT
The overall aim of this project has been to understand how attention affects decision making and what factors in a choice situation influence what the decision maker focuses on. In the first part of the project, we tested the model by Köszegi and Szeidl (2013) that assumes individuals tend to focus too much on particularly salient attributes when evaluating options. More precisely, we examined the underlying principle that individuals increase their focus on attributes for which the options differ more, as suggested by Köszegi and Szeidl (2013).
To test for such focusing effects, we conducted a series of online experiments. These experiments also aimed at identifying the factors that influence when focusing effects are affecting choices. In accordance with the research proposal, we also studied focusing using eye-tracking methodologies. Due to the limited sample size implied by the method, this approach proved to be less fruitful than originally anticipated.
The first part of the project maintained a clear focus on testing theories of focusing and attention. In the latter part of the project, the ongoing COVID-19 pandemic caused us to shift our efforts towards addressing questions related to attention and information in novel contexts raised by the pandemic.
In one study, we conducted online experiments to understand the impact of news about effective COVID-19 vaccines on social distancing behavior and beliefs about the pandemic. Our findings indicated that learning about vaccines made people more optimistic and less vigilant about the virus, which may partly explain why many countries have had difficulty controlling infections.
In another paper, we conducted an online choice experiment to evaluate the impact of stay-at-home policies on individual welfare and how it relates to the strictness of the stay-at-home policy. We also examined how different scenario descriptions can influence the perceived cost of staying at home.
In a different study, we designed a large-scale field experiment to test how different interventions influence people's vaccination decisions. For instance, we investigated how vaccination uptake was affected by providing monetary incentives and making people focus on the social aspects of the vaccination decision.
KEY FINDINGS
Focusing in Economic Choice
In Andersson, Ingebretsen Carlson and Wengström (2021) we investigated the underlying principle of Köszegi and Szeidl (2013) that individuals increase their focus on the attributes for which the available options differ more. The study is based on a series of experiments with over 1,900 subjects recruited through the Amazon Mechanical Turk online labor market platform. The subjects were presented with a series of choice tasks asking them to choose from different intertemporal payment streams. The main goal of the design was to study how preferences over two target options were influenced by a third non-target option. The non-target options were designed to be unattractive but to make one of the two target options more appealing according to the focusing model. The prediction based on the focusing model was that a target option would be chosen more often if the range of its strongest attribute was increased by the non-target option.
The main experiment showed that there was a significant focusing effect. When the decision task was manipulated to increase the emphasis on its strongest attribute, subjects were about 12% more likely to choose that option. Our results were consistent when controlling for socio-demographic variables, cognitive skills, and personality traits.
To determine if the focusing effect varied depending on the decision-making context, we conducted a series of additional experiments. In these experiments, we: (i) changed the way the payments were presented, either using graphs as in the first experiment or using numbers, and (ii) attempted to induce more or less deliberation by either requiring subjects to answer within 20 seconds or making them wait for 20 seconds or allowing them to answer without any time restrictions. Consistent with our first experiment, we observed a focusing effect. However, when we encouraged deliberation by requiring subjects to wait before answering, or presented options using numbers, the focus effects were smaller in magnitude and no longer statistically significant.
Information, attention, and optimism at the end of the pandemic
In Andersson, Campos-Mercade, Meier and Wengström (2021) we examined the effects of putting attention on the effectiveness of COVID-19 vaccines on people's willingness to engage in social distancing behavior. The study was based on a preregistered survey experiment conducted before the vaccines were available to the public. We found that receiving information about the vaccines decreased people's willingness to socially distance and their willingness to stay at home.
The results of this study suggest that the manner and extent to which vaccines are discussed by governments and media outlets can significantly impact adherence to social distancing guidelines. A priori, the direction of the effect was not clear. On one hand, focusing on the availability of a vaccine may incentivize individuals to engage in protective behaviors to avoid infection until the vaccines become available. On the other hand, research has shown that optimism and positive mood can lead to increased risk-taking behaviors. Our study provides evidence for the latter proposition, demonstrating that positive news about vaccines altered individuals' perceptions of the pandemic, causing them to become more optimistic and believe that it would end sooner. This subsequently led to a decreased attention to the importance of social distancing and other preventive measures. We estimated that, by July 2021, up to half of the positive effects of the vaccines on COVID-19 cases in Sweden could have been offset by the reduced social distancing resulting from vaccine anticipation.
Interventions emphasizing social aspects are not effective at increasing vaccination uptake
In Campos-Mercade et al. 2021, we conducted a randomized controlled trial (RCT) to investigate a range of behavioral interventions to increase vaccination take up in Sweden. We employed different behavioral nudges in which we asked participants: (i) to make a list of four people who would benefit from their vaccination (with the aim of putting focus on the social impact), (ii) to write down arguments that could best convince someone else to get vaccinated (forcing participants to reflect and focus on argumentation), and (iii) to participate in a quiz with information on the safety and effectiveness of COVID-19 vaccines (focus on the safety and efficacy). We also included one treatment in which participants received 200 SEK for getting vaccinated. We recruited 8 286 participants aged 18-49 from a representative online panel and randomly assigned them to one of the treatment conditions or a control condition. The study was rolled out at the time when the regions opened vaccination for the participant's age group. The survey data for each individual was thereafter linked to the COVID-19 vaccination records administered by the Public Health Agency of Sweden.
Our main outcome variable was whether participants became vaccinated within 30 days, according to the administrative records. We found that the monetary incentives increased vaccination rates by 4.2 percentage points, from a baseline rate of 71.6%. The nudges on the other hand had no statistically significant impact on vaccination. Hence in this context, interventions aimed at changing the attention of the individual by focusing on the positive externalities or safety of the vaccines did not significantly impact vaccination uptake.
NEW RESEARCH QUESTIONS
One new set of research questions that have emerged from the project relates to the relation between ambiguity and focusing effects. Ambiguity refers to situation in which outcomes are uncertain and decision makers are not able to assign probabilities to the different potential outcomes. Ambiguity is pervasive and -- at some degree -- present in most decision environments. We now aim to understand the impact of focusing and other context effects on choice in presence of ambiguity, and to what degree these effects are stronger when ambiguity is heightened. Together with Geoffrey Castillo at the University of Vienna we have started to work on these issues. In a first step, we have developed a virtual bingo-blower that can be used to simulate ambiguity in an online laboratory environment. In a second step, we have designed and run experiments to test how ambiguity affects focusing effects and types of context effects. In the future, we plan to take this further and utilize the virtual bingo-blower to investigate ambiguity preferences and context effects in large-scale representative samples.
DISSEMINATION AND COLLABORATION
The project group has disseminated the research through various channels, including seminar presentations at Lund University, University of Copenhagen, University of Groningen, University of Barcelona, Middlesex University and St Gallen University and conference presentations at the ESA European Meeting in Bergen, NCBEE in Oslo, SBEN workshop in Stockholm and the John Hopkins University and LSE Conference on Experimental Insights from Behavioral Economics on COVID-19. The project group has also disseminated the results through a range of media and policy forums, including BBC World News, Bloomberg, Marginal Revolution, Washington Post, The Times (UK), SR Ekonomiekot extra, Ilta-Sanomat, Hufvudstadsbladet, Aftonbladet, Göteborgs-Posten, forskning.se, abcnyheter.no, TV2 Danmark, SVT, Svenska Dagbladet, and policy seminars at IFN and SNS. We have also written blog posts on ekonomistas.se och VoxEU.
The overall aim of this project has been to understand how attention affects decision making and what factors in a choice situation influence what the decision maker focuses on. In the first part of the project, we tested the model by Köszegi and Szeidl (2013) that assumes individuals tend to focus too much on particularly salient attributes when evaluating options. More precisely, we examined the underlying principle that individuals increase their focus on attributes for which the options differ more, as suggested by Köszegi and Szeidl (2013).
To test for such focusing effects, we conducted a series of online experiments. These experiments also aimed at identifying the factors that influence when focusing effects are affecting choices. In accordance with the research proposal, we also studied focusing using eye-tracking methodologies. Due to the limited sample size implied by the method, this approach proved to be less fruitful than originally anticipated.
The first part of the project maintained a clear focus on testing theories of focusing and attention. In the latter part of the project, the ongoing COVID-19 pandemic caused us to shift our efforts towards addressing questions related to attention and information in novel contexts raised by the pandemic.
In one study, we conducted online experiments to understand the impact of news about effective COVID-19 vaccines on social distancing behavior and beliefs about the pandemic. Our findings indicated that learning about vaccines made people more optimistic and less vigilant about the virus, which may partly explain why many countries have had difficulty controlling infections.
In another paper, we conducted an online choice experiment to evaluate the impact of stay-at-home policies on individual welfare and how it relates to the strictness of the stay-at-home policy. We also examined how different scenario descriptions can influence the perceived cost of staying at home.
In a different study, we designed a large-scale field experiment to test how different interventions influence people's vaccination decisions. For instance, we investigated how vaccination uptake was affected by providing monetary incentives and making people focus on the social aspects of the vaccination decision.
KEY FINDINGS
Focusing in Economic Choice
In Andersson, Ingebretsen Carlson and Wengström (2021) we investigated the underlying principle of Köszegi and Szeidl (2013) that individuals increase their focus on the attributes for which the available options differ more. The study is based on a series of experiments with over 1,900 subjects recruited through the Amazon Mechanical Turk online labor market platform. The subjects were presented with a series of choice tasks asking them to choose from different intertemporal payment streams. The main goal of the design was to study how preferences over two target options were influenced by a third non-target option. The non-target options were designed to be unattractive but to make one of the two target options more appealing according to the focusing model. The prediction based on the focusing model was that a target option would be chosen more often if the range of its strongest attribute was increased by the non-target option.
The main experiment showed that there was a significant focusing effect. When the decision task was manipulated to increase the emphasis on its strongest attribute, subjects were about 12% more likely to choose that option. Our results were consistent when controlling for socio-demographic variables, cognitive skills, and personality traits.
To determine if the focusing effect varied depending on the decision-making context, we conducted a series of additional experiments. In these experiments, we: (i) changed the way the payments were presented, either using graphs as in the first experiment or using numbers, and (ii) attempted to induce more or less deliberation by either requiring subjects to answer within 20 seconds or making them wait for 20 seconds or allowing them to answer without any time restrictions. Consistent with our first experiment, we observed a focusing effect. However, when we encouraged deliberation by requiring subjects to wait before answering, or presented options using numbers, the focus effects were smaller in magnitude and no longer statistically significant.
Information, attention, and optimism at the end of the pandemic
In Andersson, Campos-Mercade, Meier and Wengström (2021) we examined the effects of putting attention on the effectiveness of COVID-19 vaccines on people's willingness to engage in social distancing behavior. The study was based on a preregistered survey experiment conducted before the vaccines were available to the public. We found that receiving information about the vaccines decreased people's willingness to socially distance and their willingness to stay at home.
The results of this study suggest that the manner and extent to which vaccines are discussed by governments and media outlets can significantly impact adherence to social distancing guidelines. A priori, the direction of the effect was not clear. On one hand, focusing on the availability of a vaccine may incentivize individuals to engage in protective behaviors to avoid infection until the vaccines become available. On the other hand, research has shown that optimism and positive mood can lead to increased risk-taking behaviors. Our study provides evidence for the latter proposition, demonstrating that positive news about vaccines altered individuals' perceptions of the pandemic, causing them to become more optimistic and believe that it would end sooner. This subsequently led to a decreased attention to the importance of social distancing and other preventive measures. We estimated that, by July 2021, up to half of the positive effects of the vaccines on COVID-19 cases in Sweden could have been offset by the reduced social distancing resulting from vaccine anticipation.
Interventions emphasizing social aspects are not effective at increasing vaccination uptake
In Campos-Mercade et al. 2021, we conducted a randomized controlled trial (RCT) to investigate a range of behavioral interventions to increase vaccination take up in Sweden. We employed different behavioral nudges in which we asked participants: (i) to make a list of four people who would benefit from their vaccination (with the aim of putting focus on the social impact), (ii) to write down arguments that could best convince someone else to get vaccinated (forcing participants to reflect and focus on argumentation), and (iii) to participate in a quiz with information on the safety and effectiveness of COVID-19 vaccines (focus on the safety and efficacy). We also included one treatment in which participants received 200 SEK for getting vaccinated. We recruited 8 286 participants aged 18-49 from a representative online panel and randomly assigned them to one of the treatment conditions or a control condition. The study was rolled out at the time when the regions opened vaccination for the participant's age group. The survey data for each individual was thereafter linked to the COVID-19 vaccination records administered by the Public Health Agency of Sweden.
Our main outcome variable was whether participants became vaccinated within 30 days, according to the administrative records. We found that the monetary incentives increased vaccination rates by 4.2 percentage points, from a baseline rate of 71.6%. The nudges on the other hand had no statistically significant impact on vaccination. Hence in this context, interventions aimed at changing the attention of the individual by focusing on the positive externalities or safety of the vaccines did not significantly impact vaccination uptake.
NEW RESEARCH QUESTIONS
One new set of research questions that have emerged from the project relates to the relation between ambiguity and focusing effects. Ambiguity refers to situation in which outcomes are uncertain and decision makers are not able to assign probabilities to the different potential outcomes. Ambiguity is pervasive and -- at some degree -- present in most decision environments. We now aim to understand the impact of focusing and other context effects on choice in presence of ambiguity, and to what degree these effects are stronger when ambiguity is heightened. Together with Geoffrey Castillo at the University of Vienna we have started to work on these issues. In a first step, we have developed a virtual bingo-blower that can be used to simulate ambiguity in an online laboratory environment. In a second step, we have designed and run experiments to test how ambiguity affects focusing effects and types of context effects. In the future, we plan to take this further and utilize the virtual bingo-blower to investigate ambiguity preferences and context effects in large-scale representative samples.
DISSEMINATION AND COLLABORATION
The project group has disseminated the research through various channels, including seminar presentations at Lund University, University of Copenhagen, University of Groningen, University of Barcelona, Middlesex University and St Gallen University and conference presentations at the ESA European Meeting in Bergen, NCBEE in Oslo, SBEN workshop in Stockholm and the John Hopkins University and LSE Conference on Experimental Insights from Behavioral Economics on COVID-19. The project group has also disseminated the results through a range of media and policy forums, including BBC World News, Bloomberg, Marginal Revolution, Washington Post, The Times (UK), SR Ekonomiekot extra, Ilta-Sanomat, Hufvudstadsbladet, Aftonbladet, Göteborgs-Posten, forskning.se, abcnyheter.no, TV2 Danmark, SVT, Svenska Dagbladet, and policy seminars at IFN and SNS. We have also written blog posts on ekonomistas.se och VoxEU.