Neuroeconomics and Shopping: Don’t Ask the Person, Ask the Brain

There’s a saying in neuroscience: “Don’t ask the person, ask the brain!” What does this mean in practice? And how does it affect the way we shop? Colin Camerer, a behavioral economist at the California Institute of Technology (Caltech), dives into his research on this question.

“Hypothetical bias” (AKA cheap talk) is the difference between what people SAY they'll do and what they ACTUALLY do. For example, in a survey, 70% of people might say they'll buy a product—even if only 45% actually do.

Camerer and his colleagues use brain imaging and eye-tracking to account for hypothetical bias and predict real-life shopping behavior.

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Transcript

We have a saying in neuroscience sometimes: "Don't ask the person, ask the brain," because the brain activity may be something that's less than fully conscious.

My research is about behavioral economics and neuroeconomics. And behavioral economics is using ideas from psychology and other social sciences to make economics a little bit more lifelike and fit human behavior. The neuroeconomics part is that we actually try to see what's happening in the brain when people are making economic decisions.

Hypothetical bias is a term for when you ask somebody whether they're going to do something, but there's no actual consequences, like a lot of surveys: "Are you going to vote?" "Will you buy this new product we have?" You tend to get a kind of upward "yes" bias. People are more likely to say, "Yeah, I'd think I'd buy it" or "Oh, yeah, I'm planning to vote."

The hypothetical bias can be pretty high, and it can be also retrospective. So if you ask people did they vote, 70% say yes and really the answer was 45%. 

One application is in things like marketing. A lot of new products fail, and one reason they fail is because when they test marketed, a lot of people said, "Yes, I'd buy it," who weren't going to buy it. One thing that people have been chasing in different fields in economics and psychology is how could we measure the size of this bias and adjust for it? So that if 70% of the people say they're going to buy a new product, we know that the real number is 45%. 

We did a couple of studies using brain imaging to say is there a kind of signature in the brain of when somebody says, "Yes, I would buy it," but when they really have to choose, they say no. So we showed them pictures of different goods, and the first part of the experiment, we asked them, "Would you pay $27 for this backpack, yes or no?" -- that's the hypothetical part.

And then we kind of surprised them, when they come out of the scanner, and we say to them, "Oh, by the way, now we're going to actually have you decide to spend money, so we're going to give you $50." If you want to buy the backpack for $27, we're going to take it out of your 50, so that now they have to make real decisions.

And then we study in the brain imaging, could we tell what areas were saying yes, but actually would later say no, compared to the areas that said, "Yes, I think I'll buy it," and, yes, they really did buy it. And we found both more activity in certain regions associated with valuation and then activity in different regions, which were somewhat predictive of when a yes was going to turn into, "Well, not really."

In some other studies on hypothetical bias, we used eye tracking, which is a computerized way of seeing what you're looking at for how long. It also measures pupil dilation. When you're aroused by something that you like or possibly you're scared, the pupil dilates a little bit. So we used that method and then another method using mouse movements.

And so we found that the mouse tracking and the eye tracking actually could give us an idea of when people would say, "Yes, I'm going to buy this product," but then they really didn't when they had skin in the game and had to buy it. The quicker a person moves a mouse to a box to click on something, the more they like it. It's like a fast trajectory, "I really like this." A slow meandering trajectory is, "Well, I don't know. I'm not sure." The motor activity in the mouse is actually an index in economic value as well as some other things, like indecision.

We live in a kind of golden age of social science in which we can measure things in lots and lots of different ways. So one thing we've just begun that I think is going to be really, really fun is in order to study habit and a bunch of other things, we bought a smart vending machine, and a smart vending machine is basically a vending machine in the back and a giant iPad in the front.

So you could program the iPad to show whatever you want. For example, if somebody buys habitually, and you raise the price by a few percent, do they just ignore that because they're not even looking at the price? Eventually, we'd like also to be able to use webcams or cameras to record, so when I say somebody is not looking at the price, I really mean they are not looking at the price because the camera looked at where their eyes were looking.

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