|Applied Behavioral Economics: Using Demand Curves and Discounting Rates to Guide Public Policy
|Monday, May 26, 2014
|2:00 PM–3:50 PM
|W190b (McCormick Place Convention Center)
|Area: CSE/EAB; Domain: Basic Research
|Chair: Brent Kaplan (The University of Kansas)
|Discussant: Steven R. Hursh (Institutes for Behavior Resources, Inc.)
|CE Instructor: Derek D. Reed, Ph.D.
Behavioral economics is a booming subfield of both psychology and behavior analysis. To date, behavioral economics within psychology has taken a cognitive approach to understanding human irrationalities. This psychological approach to behavioral economics has been recognized by the federal government as an effective means of nudging socially relevant behaviors. Within behavior analysis, behavioral economics has largely been relegated as an approach to understanding substance abuse and addiction; these findings, too, have been applied to public policy considerations. This symposium aims to demonstrate that applied behavioral economics within behavior analysis can be applied to a host of societal issues, in addition to novel understandings of addiction. An additional aim of this symposium is to demonstrate that the various facets of behavioral economic analyses can contribute to public policy considerations in unique ways. Finally, this symposium will highlight the potential of behavioral economics within behavior analysis to drastically improve empirical public policy efforts, beyond the contributions of solely cognitive approaches.
|Keyword(s): behavioral economics, demand, discounting, public policy
Demand Elasticity for Potentially Real Cigarettes is Negatively Associated with Income
|MIKHAIL KOFFARNUS (Virginia Tech Carilion Research Institute), A. George Wilson (Virginia Tech Carilion Research Institute), Warren K. Bickel (Virginia Tech Carilion Research Institute and Virginia Tech)
Cigarette demand is a measure of reinforcement that is associated with level of tobacco dependence and other clinically relevant measures. In the present study, income available for cigarette purchases was manipulated to assess the effect on cigarette demand. Tobacco-dependent cigarette smokers (n=15) who smoked 10-40 cigarettes per day completed a series of cigarette purchasing tasks under a variety of income conditions meant to mimic different weekly cigarette budgets: $280, approximately $127, $70, or approximately $32 per week. Prices of $0.12, $0.25, $0.50, and $1.00 per cigarette were assessed in each income condition. Participants were instructed to purchase as many cigarettes as theyd like for the next week, and that only cigarettes purchased in the context of the study should be consumed. One price in one income condition was randomly chosen to be real and the cigarettes and excess money in the budget were given to the participant. Results indicate that demand elasticity was negatively correlated with income. Demand intensity was unrelated to income condition, with low-price cigarette consumption remaining high across incomes. These results indicate that the amount of income that is available for cigarette purchases has a large effect on cigarette consumption, but only at high prices.
A Behavioral Economic Analysis of Obamacare's Tanning Tax: Suggestions for Maximizing Revenue while Reducing Demand
|DEREK D. REED (The University of Kansas), Brent Kaplan (The University of Kansas), Amel Becirevic (The University of Kansas), Jonathan R. Miller (Kennedy Krieger Institute/Johns Hopkins University)
The evidence is clear--indoor tanning use increases the risk of skin cancer by nearly 75%. Unfortunately, the use of indoor tanning devices continues to climb amongst adolescent and college-aged populations. This rampant addiction--which some have colloquially termed "tanorexia"--has resulted in an immensely lucrative indoor tanning industry with revenue estimated at $5 billion a year. This growing trend has prompted many public health watchdog agencies to call for novel but effective means of reducing demand for indoor tanning in young women. Concurrently, passage of the Patient Protection and Affordable Care Act of 2010 (i.e., Obamacare) included a provision mandating a 10% tanning tax to help offset costs associated with implementation of this statute. Preliminary research suggests that the 10% tax is ineffective at curbing consumer demand for indoor tanning. We propose the use of behavioral economic demand analyses to guide such public policy decision regarding demand for indoor tanning. Our analyses with at-risk populations suggest that a much higher tax is necessary to yield elastic demand. Thus, results from our study suggest that empirically based regulation would (a) generate more elastic demand (potentially curbing rates of skin cancer) while (b) simultaneously increasing government revenue to fund other Obamacare provisions.
Why Smart People Make Seemingly Stupid Decisions: Bayesian Analysis of Escalation in Policy Decisions
|DONALD A. HANTULA (Temple University), Shawn Patrick Gilroy (Rowan University, Temple University)
Computer simulations of human decision-making were conducted to determine the effects of individual reinforcement learning histories on policy decisions, modeled around a variable interval reinforcement contingency, akin to a series of winning or losing ventures. Earlier theories of policy decision-making have posited that the commitment of resources to failing ventures (persistence) and the increases in comment during failing ventures (escalation) are forms of pathology themselves- instances of irrational behavior. Under these assumptions, very little attention was paid to temporal or sequential factors that may have led to these phenomena. Bayesian reasoning is often promoted as a perfectly rational account of decision making. Computer algorithms generated sequences to simulate individual learning histories and also to engage in a Bayseian updating process of expected success or failure of the venture. After these series, ten loss events followed. Temporal dynamics resembling reinforcement schedules caused warranted probabilities to change. The results of 1000 computer simulations revealed that escalation and persistence emerged for most learning histories. Interestingly, instances of escalation emerged in most instances. It is concluded that, based on this simulation, the perfectly rational Bayesian escalates policy decisions under most cases of failure.
On the Relation between BMI and Delay Discounting Rates
|DAVID P. JARMOLOWICZ (The University of Kansas), J. Bradley Cherry (University of Missouri-Kansas City), Derek D. Reed (The University of Kansas), Jared M. Bruce (University of Missouri-Kansas City), John M. Crespi (Kansas State University), Jayson L. Lusk (Oklahoma State University), Amanda S. Bruce (University of Missouri-Kansas City)
Individuals suffering from addiction to various drugs are less able to value future reinforcers (i.e., they rapidly discount delayed reinforcers) than are their non-addicted peers. This skill deficit may represent a trans-disease process that is implicated in various patterns of aberrant behavior such as drug addiction, pathological gambling, and potentially obesity/over-eating. Published studies on the relation between delay discounting and body mass, however, are currently inconclusive. The current study examined this relation in a relatively large sample of overweight and obese individuals (n=50) compared to healthy and/or underweight individuals. Overweight/obese individuals (n=50) were less able to value delayed reinforcers (i.e., they discounted at a higher rate) than did the healthy/underweight individuals. This relation persisted when other variables know to impact rates of delay discounting (i.e., age, income, education) were controlled. This findings suggests that the deficits in valuing future reinforcers in obese individuals may be as robust as those in addicted individuals, supporting the notion that excessive discounting of delayed reinforcers is a trans-disease process underlying various patterns of unhealthy behavior.