Irrational Decisions by Monkeys and Humans

Economists tend to start with the assumption that humans will behave in a rational manner when making decisions. In the growing field of neuroeconomics, researchers are starting to understand the underlying brain processes used to make decisions and to choose between competing alternatives. Now, Yale researcher Keith Chen reports that our primate relatives may make irrational decisions just like humans. Seed magazine summarizes research on capuchin monkeys, and quotes Chen,

Some of the most deeply ingrained economic behaviors turn out to be very, very ancient and hardwired parts of our decision-making processes. If I showed a string of capuchin monkey data to an economist, he couldn’t, with any statistical test, tell the difference between a capuchin monkey and your average American stock market investor.

The specific tests performed involved giving the monkeys the choice between two fruit sources, one of which showed more fruit but sometimes underdelivered, while the other showed less but sometimes provided extra fruit. The monkeys were shown to be risk averse, preferring the “bonus” source over the other one, even though when amount of fruit delivered over the time was the same from both sources. This behavior was compared to human aversion to investment risk, as demonstrated by investors who prefer a constant return from interest-bearing bonds vs. a higher, but fluctuating, return from common stocks. Both monkeys and humans, apparently, prefer a gain to a loss even when the outcome is identical. (The ProgressDaily blog describes some other Behavioral Monkeynomics.)

Our conclusion: the old maxim, “Under-promise and over-deliver,” apparently has a sound behavioral, evolutionary, and neuroscientific basis. This is no big news to any seasoned marketer or manager – would you expect a top salesperson to promise delivery in a week if she knew it could very possibly take as long as two weeks? Far better to tell the customer two weeks, and let them be pleasantly surprised if delivery occurred a bit early. The same concept applies for issues like expected pricing, future quantities available, and so on – while a firm that sells based on the best possible outcome may get more orders initially, customer disappointment will ruin future sales opportunities; successful firms base promises to customers on the most conservative assumptions when there is expected variability in outcomes. A better outcome than expected is a bonus for the customer, just like the monkey’s extra fruit.

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Roger Dooley writes and speaks about marketing, and in particular the use of neuroscience and behavioral research to make advertising, marketing, and products better. He is the primary author at Neuromarketing, and founder of Dooley Direct LLC, a marketing consultancy. Follow him on Twitter.

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