Richard Thaler's "Misbehaving" Volume 2 // Part 3

 In my third blog of "Volume 2," I seek to take a more big-picture view of the ethical implications that can arise out of behavioral economics by focusing more on the individuals that make up economics. Instead of focusing on one direct industry or ethical practice, I will try and elaborate on what the ethical obligation is of the giant companies that have become more and more known in today's day and age. This is a huge feat and as such will put its hand into many different honey jars in the business world. 

First, let us start off with pricing. I have spoken about pricing before within the book with topics such as the facade of bargains and how FOMO can factor into a financial decision. Price anchoring is essentially the idea that businesses will establish a single price as the "anchor" before throwing prices for other similar products around as alternatives to the anchor. Price anchoring is essentially just playing with how a consumer perceives an item's intrinsic value and therefore makes their decision within this adjusted persection. 

A great example of this is buying popcorn. Most often these delicious bowls of buttery goodness come in three sizes which we will call small, medium, and large. Most often the smallest size is the price anchor by which the other two sizes expand on. For simplicity's sake lets say the small size costs a single $1. By the power of math the marketing we can surmise that the medium should land at the $2 mark and the large at the 3$. However, if a movie theater was to make the medium $2 and the large $2.50, our brains automatically assume that is the best price per corn since its a smaller gap between sizes. Let's also ignore any of the fine details like how the actual size of the bowl could be a facade or otherwise. If you as a customer were coming into the theater with the intent of purchasing either a small or medium and then saw this price stacking, the likelihood of you up charging to the large is very high. 

This is exactly how price anchoring works. It seeks to alter your perception of a value-added in order to entice you to make a purchase you likely would not have originally. It is also the same reason Black Friday or flash sales are so profitable with so many people feeling pressure to buy something they never would have originally. Unfortunately for many, this practice can also be abused and exploited. The movie theater example is fairly tame and the user only ends up spending $1 or 50 cents more for popcorn, but things can get far worse. Price anchoring is used in almost all industries with things like designer fashion, automobile purchasing, or even buying in singles vs. bulk. 

Next up on the chopping block is marketing and advertising. I think one of the things that a lot of people don't realize about marketing and advertisements as a whole is their potential for unethical practices. Whether it is borderline invasive tactics or manipulative biases, marketing can be used to fully influence how an individual feels about a certain product. When limited to only that, making someone want or not want a product, it seems relatively harmless. However, when discrepancies go unchecked marketers start gaining access to private streaming data. This is why you can all of a sudden receive an oddly pointed advertisement. 

This next point will be quite similar to one of my previous blog posts about the effects of consumerism on the environment, but what about the health of humans? As researchers have begun documenting, the use of products like corn syrup or GMO vegetables can have very dangerous health implications. No wonder America has an obesity problem when all of our fast food has been processed with the express goal of increasing margins. Many companies have started choosing profits over their customer's health, which is obviously an unethical practice. Seen below is a GRAPH by the National Institute of Diabetes and Digestive And Kidney Diseases, a subset of the US Department of Health and Human Services. Depicted is the percentage of adults in America who are currently within the obesity guidelines. This being the case, while not being directly caused by these unethical business practices, surely wouldn't have happened in their absence. It is a shame that nowadays companies would rather make a quick buck than take care of the very people who spend their money on said products. 

My final point is quite possibly the one that impacts me personally the greatest: transparency. Being a business student myself, I am exposed to a whole library of marketing tactics and other cheap tricks used to manipulate the everyday consumer. Transparency when it comes to these tactics has always been missing for the majority of customers. When conducting my own preliminary research I discovered multiple examples that frustrated both myself as a consumer and myself as a business student. Toothpaste not differing even slightly from brand to brand except for pricing, "organic food" being a completely meaningless word, and the words "healthy" being allowed for just about anything just to name a few. Even in non-food industries, so many people have no idea what they are getting themselves into when it comes to signing forms or opting in to whatever is thrown at them. Everyone has heard the horror stories about X company giving customer A a form to sign and A ends up signing away their life to X. Unfortunately these stories, while oftentimes being heavily hyperbolized, aren't actually that far off from real life. Multiple major companies like Apple, Google (AKA Alphabet), Yahoo, Facebook (AKA Meta), and even LinkedIn have all received investigations about data misuse and breaching. This is not meant to be my getting on a high horse to preach about how you should throw away your phone and smash your Alexa device. I simply seek to demonstrate that maybe the companies making all this money off you don't necessarily have your best interest in mind.