At a coffee shop in Bluffton, South Carolina, people have been spontaneously paying for future customers’ drinks on a fairly consistent basis. Sometimes, those who are not even looking to buy coffee for themselves will come in and donate money for future (anonymous) customers.

While certainly unique, this may not be too surprising when viewed under the lens of behavioral economics — and could suggest an interesting business model. Let’s consider a hypothetical coffee shop that chooses to employ a strictly “pay-what-you-want-for-other-customers” pricing strategy, in which customers can only leave money to be used by other customers, and are allowed to leave as much (or as little) as they would like. In turn, their drinks are paid for by previous donations.

First, there are a number of examples in the scientific literature (and in the real-world) of the benefits of pay-what-you-want pricing systems. Allowing people to pay the price they want can sometimes result in people paying more money than they would if a standard price was requested for any particular product or service.

Second, recent research by Elizabeth Dunn, Lara Aknin, and Mike Norton shows that spending money on others can have a more positive impact on one’s happiness than spending money on oneself. So this may mean return visits by customers who wish to get that extra boost in happiness that they do not get from places where they buy their own selected product(s).

Third, Dan Ariely has studied how powerful the idea of “free” can be; in short, people love free things. Receiving a “free” drink in our hypothetical coffee shop (paid for by another customer) should be more desirable than directly paying for the drink.

At this hypothetical coffee shop with a “pay-what-you-want-for-other-customers” pricing strategy, customers may have an experience in which they get to enjoy a “free” product (good for that customer), get a boost of happiness from buying something for others (good for that customer…and the customer(s) who get to spend that money), and may wind up spending more money overall than they would have under a traditional pricing scheme (good for the coffee shop). Thus, allowing people to pay what they want for other customers may potentially lead to a lot of good all around.

There are certainly many risks that come along with a “pay-what-you-want-for-other-customers” pricing system. But if the events of the coffee shop in South Carolina are any indication, such a pricing strategy may just be irrational enough to work.

~Jared Wolfe~

To all those who attended the PoorQuality forum last night, thanks for participating!

For more information about the exhibit, please see our Artistically Irrational website

Call for Artists to respond to research on inequality

Hosted by Dan Ariely and the Center for Advanced Hindsight

Artists from around the world are invited to attend a discussion on social and economic inequality (from the lab that hosted the “Creative Dishonesty” project), on Wednesday, February 22^nd at 7 PM EST.  (Artists who do not live within driving distance of Durham, NC will watch the forum streaming live online.)

Interested artists are to RSVP to the curator, Catherine Howard, at creativedishonesty@gmail.com by Tuesday, February 21st at 9 PM EST

After the forum, artists interested in creating artwork in response to the research will complete an online application, including a 1-page explanation of the artist’s creative process and 2-3 digital images of past work.  To be considered, applications must be submitted by Monday, February 27^th at 9 PM.

Artists will be notified if they are selected to participate by February 29^th and will receive a $100 stipend to complete their piece.  There is no limitation to the style or media of pieces created for “PoorQuality” but all work must be completed by May 5^th. 

Artwork created for “PoorQuality” will be on display at the Center for Advanced Hindsight from June 1^st to August 31^st with a reception on June 22^nd.  An exhibit catalogue, including responses and reflections by the artists and the researchers, will be published.  Each artist will receive a copy.

Artists will retain all rights to their piece. Works will be returned to artists after the exhibit by September 15^th, 2012.  If the piece is purchased, the $100 stipend will be deducted from the purchase price.

Important Deadlines

Feb 22, 7 PM – “PoorQuality: Inequality” forum at the Center for Advanced Hindsight

Feb 27, 9 PM – Deadline to apply for participation

Feb 29, 9 AM – Selected artists will be notified

May 5, 9 PM – Drop-off deadline

Jun 22, 6 PM – 10 PM – Opening reception at the Center for Advanced Hindsight

For more information about the “PoorQuality” project, contact curator Catherine Howard at creativedishonesty@gmail.com.

Learn more about this research at danariely.com

UPDATE: We have a new website fully devoted to our “Artistically Irrational” art series.

Check it out here: http://artisticallyirrational.ssri.duke.edu/

The image (and jingle) of the bells of Salvation Army volunteers is almost as synonymous with the holiday season as Santa Claus himself. However, the New York Times reported last month that a change may be coming to a street corner near you; the charity has begun testing the use of a digital donation system called Square that would allow passersby to donate via credit card, rather than have to worry about scrambling for loose change.

The article mentions two potential benefits of this kind of system. First, people are less likely to carry cash on them as they were in the past, and so Square’s credit card system provides people with a quick, simple, and convenient way to donate when they don’t have any real money handy (and with 1 in 7 Americans carrying at least 10 credit cards, this shouldn’t be a problem). Second, a credit card system would be safer because donations would not be vulnerable to theft like money in the kettle has always been.

Still, this credit card system may unintentionally have another significant benefit: it may lead people to want to donate more money than they would otherwise. There is a concept in behavioral economics known as the “pain of paying.” Simply put, it hurts us to spend (and part with) our money. And since buying things with a credit card is a less direct, less tangible way to part with money than using cash, it can feel less painful, and therefore lead people to spend more.

Assuming that this effect generalizes from buying products to donating to charities, Square’s credit card system may actually lead to larger total donations for the Salvation Army, whether it is because more people decide to donate, or because more money is donated by each individual. (Not to mention the possibility that people may feel silly choosing “loose change”-style amounts (e.g., 35 cents) to donate via credit card, and so may round up to the whole dollar for that reason alone).

So Square’s credit card system may, through behavioral economics, lead people to be more generous with their donations to the Salvation Army. If the Salvation Army uses this new system and winds up faring well, perhaps other charities should take note and consider implementing such a system as well.

Have a happy holiday season, everyone! And remember that doing the most good may be just a swipe away.

~Jared Wolfe~

The Center for Advanced Hindsight at Duke University is

Pleased to Coordinate and Host the Exhibition

Creative Dishonesty: Cheat Codes

on display at 2024 W Main St, Bay C, Durham, NC from

December 3, 2011 to January 31, 2012.

with an opening reception on

December 16, 2011   6 – 10 PM

As a magnanimous gesture of support for artistic ingenuity and creative perspectives, twenty artists were invited to create innovative and engaging artwork in response to research on behavioral economics, dishonesty, and cheating after attending an interactive forum at the Center for Advanced Hindsight.

With no limitation to the style or media of pieces created for “Creative Dishonesty: Cheat Codes,” a portion of the artists, which included sculptors, painters, and photographers, branched out stylistically from their normal medium, while others pushed conceptual boundaries.

Albert Gilewicz, a sculptor, utilized “Ethos” bottled water as the foundation for a sculpture exploring the truth behind branding and corporate marketing, compelling the viewer to confront the reality of selling their morality for the sum total of $0.05 donated to the development of drinkable water sources in Africa.

Artist Kerry Cox created an interactive installation that questions the nature of imagery as “moral” or “immoral” through audience participation.  In a similar vein, Bruce Mitchell and Adrian Schlesinger created projects inquire how to classify an image as “art” after mechanical tools are used to enlarge, project, draft, and print.

Meet these artists and many others at the opening reception on December 16^th from 6-10 PM!  Pick their brains about the relationship between creativity, honesty, cheating, and the “fudge factor”.   Join us on Third Friday for delicious food, wine, thoughtful artwork, and lively conversation at the Center for Advanced Hindsight, 2024 W Main St, Bay C, Durham, NC.

An exhibit catalogue, including reflections by the artists alongside responses from the curator and the researchers at the Center for Advanced Hindsight, will be published and available for purchase.

For more information about the Creative Dishonesty project, contact curator Catherine Howard atcreativedishonesty@gmail.com.

Did you know that free checking works by exploiting the everyday cash shortages of the poorest in our country? There is a company that dresses it up and sells it to banks.

I recently moved to Durham from Boston, and as it goes I had to set up new accounts to establish services for my loft. Part of this task involved deciding on a bank to take my deposits and facilitate payments. I set up a simple matrix to help me decide on a bank that included two simple categories: proximity and fees. There were plenty of banks within a reasonable distance to me, but where my matrix failed was in the fee category.

Apparently, “free” checking accounts are now ubiquitous. Sounds good, right? Not for me. I work in behavioral economics. Free checking looks to me like Winnie the Pooh walking out of a XXX movie theater. In other words, innocence doesn’t have sweat on its sneaky brow. There is no such thing as free, it’s just hiding. Cost can be intangible, but this is not the case with free checking. So, who pays for free checking for all of us? Consumers with illiquidity issues, and these are the people who need their money the most. There cannot be a worse target. What used to be called a penalty fee for overdrafting an account is now called a convenience fee or value added service. How appealing. These fees add up and happen frequently enough to offer free checking.

I had to ask, from whom are all of these banks getting this bright idea? I found that banks of all sizes offer free checking, so this tells me that there must be a third party facilitator. I searched for B2B bank products under the granddaddy of all bank facilitators, Fiserv, and smiling at me like Miss America with AIDS was none other than Carreker.

Carreker calls it Revenue Enhancement and it is a very attractive service for any bank that puts money before fairness to consumers. Carreker enables a bank to collect on penalty fees and clear transactions in real time, which is how Carreker can boast that the bank will see immediate results. It is not because they have done something truly beneficial for the customer. Most of all, Carreker actually controls the overdraft decisions. They have their hand on the penalty revenue throttle. As a customer’s account goes negative, they can allow the customer to overdraft not once but for several transactions, thus incurring high fees. Senior Vice President and Managing Director of Carreker Revenue Enhancement, Jeff Burton, claims that the “fee income market is fine” provided that you [the bank] position yourself with Carreker to share in the wealth.

Aggressive revenue seeking has changed the manner of normal operations into more of a production model. Banks now call overdraft penalties by a new name: exception revenue. Furthermore, they want you to see it as if they are doing you a favor and that it is okay, in fact perfectly fine as you now know, if you need to overdraft your account. The negative connotation has been replaced by the notion that your bank is forgiving and would never prevent you from making that gratifying purchase. It is not right to allow customers to pay an average of 9 X $30 if they miscalculate their account balance. Alas, Carreker does not stop with their exception revenue system.

Burton states that they have gone as far as to create a special framework for one of their clients to allow them to profit from payday loans. This is what they call their approach to increase overall revenue and customer utilization. I’m not sure about you, but I am not here to be “utilized.” Carreker will continue to innovate new ways to capitalize on the hardships of consumers. Most frighteningly, they are not just an idea firm because they actually provide the framework, algorithms, and integration to allow the bank to carry on these evil deeds.

For what’s it’s worth, I changed my decision matrix to seek a bank that had all around low fees, so I can avoid living off of the money of people who desperately need it. I’m still looking.

~Myles Leighton~

Artists from around the world are invited to attend a discussion about behavioral economics, dishonesty and cheating at the Center for Advanced Hindsight on October 25 at 7:30 PM EST.  (Artists who do not live within driving distance of Durham, NC can watch the forum streaming live online.)

Interested artists should RSVP to Catherine Howard (irrationalcreativity@gmail.com) by October 24 by 9 PM for driving directions and/or the online streaming link.

After the forum, applications will be circulated to artists interested in creating artwork to depict their reflection on cheating and dishonesty.  Applications will include a brief explanation of the artist’s creative process and 2-3 digital images of past work.

Please submit applications to Catherine Howard at irrationalcreativity@gmail.com by October 28.

Artists will be notified if they are selected to participate by October 29 and will receive a $100 stipend to complete their piece.  There is no limitation to the style or media of pieces created for “Cheat Codes,” but all work must be completed by November 26. 

Artwork created for “Cheat Codes” will be on display the Center for Advanced Hindsight from December 3, 2011 to January 31, 2012.  An exhibit catalogue / book, including responses and reflections by the artists and the researchers at The Center For Advanced Hindsight, will be published. Each artist will receive a copy.

Artists will retain all rights to their piece. Works will be returned to artists after the exhibit by February 15, 2012.  If the piece is purchased, the $100 stipend will be deducted from the purchase price.

Important Deadlines

Oct 25, 7:30 PM: Dishonesty forum at the Center for Advanced Hindsight
Oct 28, 9 PM: Deadline to apply for participation in “Dishonesty”
Oct 29, 9 PM: Selected artists will be notified
Nov 26, 9 PM: Drop-off deadline
Dec 16, 6 – 10 PM: Opening reception at the Center for Advanced Hindsight

For more information about the Creative Dishonesty project, contact curator Catherine Howard at irrationalcreativity@gmail.com.

Several years ago, I began to make human-dependent cardboard robots and place them on the streets of New York City. These little robots, which came to be known as Tweenbots (a combination of the words “between” and “robot”), roll at a constant speed, in a straight line, and have a flag that says that they are trying to get to a certain destination (e.g., the southwest corner of Washington Square Park). The flag asks for people to aim the Tweenbot in the right direction to reach its goal.

New York City is a large and bustling place – and if one ascribes to the stereotypes about New Yorkers’ helpfulness, the outlook did not appear promising for these little cardboard robots.

On the other hand, the Tweenbots are irresistibly cute. They have a cheerful posture and move along at a bumbling pace. As you look down at them, the first thing you see is an iconic smiley face made of two large circles for eyes and a line for a mouth.

Scott McCloud, who writes about the theory of cartoons in his book Understanding Comics, explains the deeply embedded mental processes that compel us to interpret everything in our own image; we can’t help but transform two dots and a line into a face. For McCloud, the less realistic –the more abstract and iconic– a character’s features, the more easily we fill in the details based on our own perspective and imagination, “assigning identities and emotions where none exist.” We project ourselves onto characters so that we not only identify with them, we inhabit and become them.

Over the course of a few months, as I observed people interacting with the Tweenbots, I came to realize just how powerful their anthropomorphic and emotive qualities were. At first, I started to perceive this through people’s use of simple gestures that are commonplace in our everyday social interactions; when a pedestrian looked down at a Tweenbot’s smiling face, they couldn’t resist smiling back. This automatic mimicry is a sort of emotional contagion, and goes beyond unconsciously mirroring another’s expression – it also implies that you can “catch” or feel the emotions of another. I saw this automatic response over and over again, and hoped that by smiling in response to the Tweenbots, people were actually feeling happier. I also came to recognize that people were experiencing deeper emotional connections when, moments after they characterized the Tweenbot as happy and non-threatening, they seemed to consider the Tweenbot’s presence in the context of the big city and respond empathetically to their plight.

Empathy is being able to walk a mile in someone’s shoes, to vicariously experience and understand what another is going through. As I watched some people bend down and gently orient the Tweenbot in the right direction, it occurred to me that the Tweenbots were inviting people to extend beyond themselves to experience the city from the perspective of a tiny and tragically cheerful cardboard robot. With their improbable presence on city streets, Tweenbots are the quintessence of vulnerability, of being lost, and of having intention without the means of achieving their goal alone. We all know –or can imagine– what it feels like to be lost or helpless in the face if the city’s massive network of streets, subways and crowds. But this overwhelming milieu may also be the reason that we ignore others who may need help as we go about our daily routines. The unexpected appearance of the Tweenbot, along with their disarming appearance, disrupted the self-focused navigation of the city, inviting people to stop and interact. New York brought the Tweenbots to life when people projected their own feelings onto the simple forms of the Tweenbots, and in a small way for just an instant, they perhaps saw themselves looking up from the sidewalk as a helpless cardboard form.

It seemed entirely possible that this empathetic connection was what motivated so many people to help the Tweenbots. Every time a Tweenbot got stuck in a pothole or started to grind futilely against a curb, someone would come to its rescue. Strangers, who seconds before would have no reason to talk to one another, came together to help. People talked to the Tweenbots, and asked for directions on the Tweenbot’s behalf when they did not know which direction to aim it. Of all the amazing interactions, my favorite was when one man turned a Tweenbot back in the direction it had just come, saying out loud to it “you can’t go that way, it’s toward the road.”

~Kacie Kinzer~

To learn more about the Tweenbots, you can check out the website here.

Tweenbots from kacie kinzer on Vimeo.

In an episode of “The Office,” Michael Scott takes on the role of matchmaker at a Valentine’s Day party. In an attempt to fix geeky Eric up with awkward Meredith, he helpfully points out their similarities: “So, Eric, you mentioned before that you are in Tool & Die Repair. Meredith recently had a total hysterectomy, so that’s sort of a repair. [uncomfortable silence] Alright, I’ll let you guys talk.”

Like Michael, most of us have made matches between people, from grabbing two strangers by the arm at a party and introducing them to each other to mediating preexisting romantic interests. Michael Norton of Harvard Business School and I wondered about the nature of this common behavior: why do people like to be matchmakers? Is it a desire to be popular, to fulfill social goals or to have an instrumental role in social networks? We show that it is simpler than that: people get a happiness boost from matching others!

We explored the impact of matchmaking behavior on happiness in different non-romantic scenarios. After being asked to make matches, our participants reported that they were happier post-matchmaking. We measured their happiness with a 7-point scale (1: very unhappy to 7: very happy) and examined their persistence in matchmaking (“would you like to make another match?”)

We first looked at whether people get a happiness boost when they make any type of match (e.g., à la Michael Scott). We found that matchmakers are happier when they make matches between two people they actually think will get along rather than on a random dimension such as looking alike. Furthermore, people enjoy matching those who are least likely to know each other; introducing a banker colleague to an artsy cousin makes people happier than introducing two philatelist co-workers from their workplace.

Another important dimension in matchmaking, of course, is the actual success of these matches. Do people still feel happy even when their matchmaking ends with a dating horror story rather than a happy marriage? When asked to think about previous matchmaking experiences, participants who recalled making a successful match (e.g., “my mom got along very well with my emo friend”) reported a happiness boost while failed matches (e.g., “my neighbor made my aunt uneasy”) was actually costly for well-being.

Though Michael Scott is rather hopeless at bringing lonely hearts together, given our findings we would recommend that he continue with his efforts but change his strategy; stay away from random introductions, match people who have a low likelihood of meeting but would enjoy each other’s company and aim for the matches to work out. Fewer awkward silences and happier matchmakers guaranteed.

~Lalin Anik~