PsychologIcal perspective

This page gives more information about the pschychological perspective on nudge marketing. In this part the dual system framework will be discussed. The psychological perspective of nudges in markets explains how the underlying psychological meganisms of decision making, and with that nudges work.

Dual system framework

People are not perfect in decision making. Very often they do not make a comprehensive cost/benefit analysis when they make a decision. However, they use mental short cuts or rules of thumb. Human decision making consists of two systems, and this Dual System Theory forms the base of the idea of nudges (Kahneman, 2011). There are two distinct cognitive systems that underpin our judgement, reasoning and decision-making processes: System 1 and System 2 (Kahneman, 2011).

System 1 processes are intuitive, fast, automatic, heuristic, and associative and a majority of our daily decisions are made using this system. In contrast, System 2 processes are slow, rule based, analytical, and deliberative (Evans, & Stanovich, 2013). Mostly the basis on which people make poor lifestyle choices is through the activation of System 1 processes (Thaler, & Sunstein, 2008). So the goal of nudges is to generate positive behavioural change by targeting System 1 processes. This is done by reorienting features of the choice architecture on which biases and heuristics are invoked, without the decision maker’s awareness (Lin, Osman, & Ashcroft, 2017)

Figure 1: Dual Process Theory of Thought

Nudges in markets

As said, people typically rely on only a few important cues and ignore most of the available information. While shopping in supermarkets, people make fast judgements based on a paucity of information, such as buying foods with attractive packages, low-priced foods or brands they are familiar with (Todd, 2007) – they almost never read the information on the label. So while shopping, people mostly use System 1, more than they make use of System 2 of the Dual System Framework in deciding what to buy. So supermarkets could use nudges to lead people to buy certain products.

Video 1: Nudging: Just a simple trick can nugde you to eat healthy

Figure 2: nudging of healthy food

Conclusion

So, human decision making consists of two systems represented in the Dual System theory. System 1 is fast, automatic and relies on emotion and is most used in daily life. System 2 is slow, effortful and logic. Nudges target System 1 of making to change human decision making without people noticing. Supermarkets can make use of nudges to influence people's shopping behaviour.

References:Evans, J. S. B. T., & Stanovich, K. E. (2013). Dual-process theories of higher cognition: Advancing the debate. Perspectives on Psychological Science, 8(3), 223–241. doi:10.1177/1745691612460685 Kahneman, D. (2011). Thinking fast and slow. London, UK: Allen Lane Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. New Haven, CT: Yale University Press. Lin, Y., Osman, M., & Ashcroft, R. (2017). Nudge: Concept, effectiveness, and ethics. Basic and Applied Social Psychology, 39(6), 293-306Todd, P.M. (2007) How much information do we need?European Journal of Operational Research, 177, 1317-1332
Image references: [Learning From Scratch by Thinking Fast and Slow with Deep Learning and Tree Search]. Reprinted from David Barber, 2017. Retrieved from https://davidbarber.github.io/blog/2017/11/07/Learning-From-Scratch-by-Thinking-Fast-and-Slow-with-Deep-Learning-and-Tree-Search/[Lifestyle & Healthy Eating Tips For Diabetes Type 2]. Reprinted from the Diabetes Council by Jamsmine Burns. Retrieved from: https://www.thediabetescouncil.com/lifestyle-dietary-tips-for-diabetes-type-2/

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