Behavioural Regulation

1. BehaviouralRegulation Alberto Alemanno HEC Paris NYU School of Law

2. ourunderstanding of regulation is set to change as a result of behavioural sciences

3. involvethe systematicanalysis and investigation of humanbehaviourthroughcontrolled and observation.

5. how humansactuallybehave (whentheymakechoices)

7. humans are not

8. but

9. Irrational Intuitive Emotional Rational Reflective Impassive

10. Why thismatters for policymakers?

13. a few illustrations of insights frombehaviouralresearch

14. 1. framing around 70% around 35% 90% OK 10% SIDE EFFECTS

15. evensmall apparentlyinsignificantdetails can have major impact on people’s behaviour

16. 1. framing The location of food items in a cafeteria

18. producesomeunexpected impact

19. i.e.

21. Youareable to increase/decrease the consumption of many items by as much as 25%

24. lesson learned • people influenced by how information isframed • choices not affected by properties but frame  contextmatters

25. 2. the power of inertia

26. lesson learned • Automaticenrollmentmore participation • Inertiameansdefaultmatters

27. 3. Social influence + 25%

28. but also • Anchoring- tendency to relytooheavily on one piece of information whenmakingdecisions • Loss aversion/Endowmenteffect– A lossfrom the status quo perceived as more undesiderablethan a gain • Group polarization/Confirmation bias - to favor information thatconfirmspreconceptionsregardless of whether the information istrue • Zero-riskbias– preference for reducing a smallrisk to zero over a greater reduction in a largerrisk • Informational cascades • Choice and information overload

29. Lesson learnedhow actually people makechoices?

31. an alternative view of human agent of utmost importance for policymakers

32. success of policymaking depends on understanding of people’sbehaviour

33. yet despitefailure to predictpeople’sbehaviour little efforts atunderstanding ‘behaviour’ in policycircles.

34. Why so?

35. while behavioral research demonstrates the extent and limits of rational action, it does not provide regulators with a ready-made framework for incorporating its insights into policy making

36. generally • no formal recognition • timid use of behaviouralresearch • lack of systematicintegration in policymaking

37. avantgarde

39. EO 13563June 2012 “where relevant, feasible, and consistent with regulatory objectives…each agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. These approaches include warnings, appropriate default rules, and disclosure requirementsas well as provision of informationto the public in a form that is clear and intelligible”.

42. Randomised controlled trials (RCTs) Random allocation to groups RCT is an experimental design which involves random allocation of participants, either to an experimental group which receives some form of ‘treatment’ or intervention, or to a control group which receives no such special treatment or intervention. experimental group control group

47. Consumer RightsRegulation

48. Article 22 Additional payments Before the consumer is bound by the contract or offer, the trader shall seek the express consent of the consumer to any extra payment in addition to the remuneration agreed upon for the trader’s main contractual obligation. If the trader has not obtained the consumer’s express consent but has inferred it by using default options which the consumer is required to reject in order to avoid the additional payment, the consumer shall be entitled to reimbursement of this payment.  to address power of inertia

49. Distance Selling Directive Cooling-off period of 15 days  myopia/impulse buying

50. web screen ballot-box encourages active choice of preferredbrowsers, and implicitlyremovesthe impact of default