2 - Behavioural Learning and the Design of Incentives

Summary

This chapter examines how individuals learn, and the biases and models that help expression information updating. Learning is arguably central of the effect of behavioural incentives, as incentives are behavioural stimuli, yet stimuli need to be perceived and hence learned about for them to exert an effect. This applies to monetary and social incentives as well as nudges. In a way, behavioural incentives are about understanding how making learning easier matters, such as making some stimuli more salient by priming them or priming a social norm. Learning often affects narratives which give structure to actions and gives rise to what we call confirmation biases. Learning is affected by people’s priors (views of the world people have before processing information), namely what they already know, their attitudes towards absorbing new information, trust, the credibility they attached to different information sources, and the need to understand new information to learn about something. Finally, individuals tend to learn from others. Learning is thus more than the process resulting from verbal or written messages. It might also result from emulation, opposition to others’ behaviours, or concerns about the judgement of others, to avoid shame or seek status.