London Economics are running a series of course on behavioural economics and consumer finance. The details are available here Many of the topics below are covered in our second term Behavioural Economics and Public Policy module are part of the MSc programme here. The role of behavioural economics in regulation is a particularly interesting topic and goes beyond ideas of how to influence behaviour into a broader set of questions on the implications of this for policy, regulation and understanding markets more generally.
Introduction to the day and the format
The underlying principles
Understanding the definitions of behavioural economics and its uses
Comparisons with traditional economics: how it differs in substance and use
An introduction to the key unconscious biases that affect decisions and behaviour
The role of social influence in purchasing decisions
The difference between regret-aversion and loss-aversion
How framing of information affects consumer choices
An overview of the relevant academic literature
How behavioural experiments can be used to investigate consumer behaviour
The FCA’s understanding and application of behavioural economics
Why regulators are interested in behavioural economics and what they’re saying about it
Outlining the key points from the FCA’s paper on the subject
What evidence could organisations provide to demonstrate they are meeting the regulators expectations?
Examining some product or service features that could cause more concern for the FCA
Relevance of behavioural economics for the FCA’s new objective to promote effective competition
How are other relevant organisations – such as the CMA – applying behavioural economics?
Interactive breakout session
Delegates will now take part in a behavioural experiment that will illustrate one of the points discussed in the FCA’s paper. The outcome of this experiment and its relevance will then be discussed by the group
Applying behavioural economics in retail financial services
Why and how key characteristics of retail financial services require behavioural economics:
Complex products, including complexity in pricing frames
Risk and uncertainty
Infrequent purchases with little opportunity for learning from past experience
Products with multiple parts and add-ons
Trade-offs between present and future
Which preferences, beliefs and rules-of-thumb apply most to financial decisions?
Why status-quo bias is so pertinent to financial services
Why individuals find mental accounting difficult and what it means for financial products
Interactive breakout session
Delegates will now break into groups to work on a case study, identifying which of the biases covered are most likely to affect the product or service they have been asked to consider and how this can best be rectified. The outcomes of each discussion will then be shared with the group.
Behavioural economic experiments: design and application
Explaining what makes a good behavioural experiment and why they are useful
Case studies of behavioural experiments in practice:
FCA (2013) “Encouraging consumers to claim redress: evidence from a field trial”
London Economics (2014) “Study into the sales of Add-on General Insurance Products: Experimental consumer research”, a report for the FCA
London Economics (2011) “Evidence from consumer experiments”, a study informing the OFT’s market study on consumer contracts
London Economics (2010) “The impact of price frames on consumer decision making”, a study for the OFT
How were these designed and what factors needed to be taken into account?
What were the key findings and how have they been used?
Designing a behavioural experiment to meet your requirements: what needs to be considered?
Next steps and application in your organisation
Identifying where behavioural economics could be most beneficial for your organisation
Quick wins: which bits of information from today could help colleagues adapt their approach tomorrow
Applying lessons from existing research to your current practices or future plans
What you need to know before commissioning your own behavioural economic experiments
An overview of the key lessons from the day
End of course