9 - How Can Firms and Governments Influence Our Choices?

Summary

In addressing the question of how firms and governments can seek to manipulate behavior, this chapter considers a wider range of perspectives than the “Nudge” approach popularized by Thaler and Sunstein and the “Boost” approach that has recently focused on enhancing decision-making skills rather than on exploiting “supposedly irrelevant factors” that make consumers “predictably irrational.” It thus covers how shopping mall and in-store shopping environments are designed to divert attention to keep shoppers shopping via the “Gruen transfer” process. The chapter also covers the use of product-proliferation strategies aimed at creating “confusopoly” markets and devious strategies such as teaser offers and the shrouding of product add-ons. The highly influential “principles of persuasion” offered by Cialdini are considered, along with the role of sales scripts, emotion-triggering strategies and systems aimed at inducing “ego-depletion” to drive customers to spend more than they had planned. Finally, the chapter introduces economists to the notion of “demarketing,” i.e., strategies for dealing with time-wasting “customers” and excess demand for public services.