Rick Larrick, the Michael W. Krzyzewski University Professor in Leadership at Duke University's Fuqua School of Business wrote about his research for policyshop in October. In the video below, he gives a vivid and compelling account of the key principles required to effectively empower consumers with the information they can use to make better decision. This post originally appeared on the Fuqua Faculty Conversations blog.
In recent years, the new field of behavioral economics has used psychology to identify strategies (or “nudges”) that can help people make better decisions for themselves and for society. This talk will review research on a few simple strategies for providing clear information to consumers and employees.
We argue that the best way to help decision makers is not to simply give them information (picture the long credit card disclosure statements you periodically receive), but to make it usable. Our main focus has been on energy use. Every time consumers buy a new automobile in the U.S., they see a window sticker on every vehicle describing the car’s fuel economy, expressed as miles per gallon (MPG). What information would you put on an energy label to help consumers make better decisions about energy use (and the environment)?
We propose four principles for providing better information (which abbreviate to CORE):
- Do the calculations for consumers
- Translate information to personal objectives (e.g., costs, environmental impact)
- Provide relative comparisons (e.g., other products, daily goals)
- “Expand” important outcomes (e.g., costs over time)