Why "Doing Nothing" Can Cost You a Fortune
Psych 🧠 - 355/500
Hello Reader,
How is it going for you?
Today’s study investigates how people's tendency to avoid action, also known as “Omission bias,” influences their financial decision.
This is specifically in the context of debt repayment to the UK government.
What is it?
The researchers conducted a large-scale field experiment, manipulating the framing of messages sent to debtors to either emphasize inaction as an oversight or as a deliberate choice.
Major findings:
Commission framing doubles repayment rates: By framing non-response to a payment request as an active choice (commission), the researchers significantly increased repayment rates, nearly doubling them compared to the control group (omission framing).
Substantial financial impact: This simple reframing strategy generated over $1.4 million in additional revenue for the UK government, highlighting the significant real-world impact of understanding and leveraging omission bias.
Increased perceived costs of inaction: A follow-up survey experiment revealed that the commission framing increased the perceived severity of not responding, potentially explaining the increased compliance rates observed in the field experiment.
Framing effectiveness independent of source: The framing effect was consistent regardless of whether the message was sent from an individual or a collective entity (e.g., the UK tax office), suggesting the power of the commission framing itself.
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What do I need to know:
People are sensitive to blame and seek to avoid it: By framing non-action as a deliberate choice, the researchers made inaction more salient and potentially increased the perceived social and personal costs of not complying, thus encouraging repayment.
Omission bias can be exploited for pro-social goals: While previous research has focused on the negative consequences of omission bias (e.g., leading to inaction and missed opportunities), this study demonstrates its potential for promoting desirable behaviors like debt repayment.
Simple changes in communication can have a big impact: Reframing a message to highlight the act of commission can significantly influence behavior, even in the context of complex financial decisions.
Source:
https://myscp.onlinelibrary.wiley.com/doi/epdf/10.1002/jcpy.1392