Have you ever had your food get cold while you are searching for a movie on Netflix? Other choice engines can assist you with choices that have far more implications, in the same way that Amazon and Netflix can assist you in selecting a book to read or a movie to watch. Do you use packages for your cell phone services from Tele? How do you choose which type of package to buy? You must think about how much you are speaking to people in relation to using data or sending text messages. What would it be like if Tele or some other algorithm could analyze your user history and provide you with the best choice for you? Here are two examples of such platforms. Billshrink.com gives you personalized recommendations for a cheaper cell phone plan based on your calling history. [1] For those consumers who are concerned that an automatic renewal of their subscription they no longer want may occur; BillGuard, a program that keeps an eye on their credit card and bank statements and notifies them when there are any recurring charges.
Third-party intermediaries like these are competing with one another to present consumers with relevant information in user-friendly ways. These intermediaries are called choice engines. We are constantly confronted with information that is highly important but extremely hard to navigate or understand. This is why we need choice engines to make our lives easier. Choice engines are technologies that interpret complex data and aid in the decision-making of consumers. If choice engines succeed, consumers will be able to search for credit cards, cell phone plans, or even mortgages as easily and effectively as they search today for airplane tickets. But what are choice engines and how do they work?
What is the impact of information on the quality of decision-making by consumers? Even though this concept is over 10 years old; how much do we know about ‘smart disclosures’? Consumer interaction with businesses and the government produces a vast amount of commercially valuable data. However, consumers may not always benefit from the value provided by such data, especially when it is collected by third parties that then detach them from their personal information. Within most Western countries, with the introduction of new laws and regulations, there is now a chance to use “smarter disclosure” of this personal data to empower consumers and open up new markets. When a private corporation or government agency gives an individual periodic access to their personal data in open formats that make it simple for them to utilize, that is known as smart disclosure. Specifically, smart disclosure refers to the timely release of data in standardized, machine-readable formats in ways that enable consumers to make better decisions about finance, healthcare, energy, or other contexts.
How many of us know about the ‘Blue Button’? The Blue Button represents a movement in some Western nations that enables consumers to have easy access to their own health information in a format that they can use. The concept emerged in 2010, aimed at enabling more direct consumer access to personal health information by adding a ‘Download My Data’ button to patient portal systems. [2] What about the ‘Green Button’? It follows the success of the ‘Blue Button’ and it’s a simple way to allow consumers to access their utility data. [3] This resulted in a ton of information sharing about energy consumption and in all likelihood energy savings that result from more informed consumers.
Here is an interesting example of how humans prefer simpler disclosures of information in order to be guided by it for decision-making. In early 2012, Richard Thaler and Will Tucker helped organize a White House summit on information disclosure policy. [4] The preparatory material we sent out before the summit to the more than 300 registrants from over 60 federal agencies started with two sentences of event reminders and then informed attendees that they would get the healthy lunch option unless they requested an alternative. Just 10 lines later they explained: “Healthy options for lunch may include, but are not limited to, a bean sprout and soy-cheese sandwich on gluten-free soda bread.” In the final sentence of the information packet, they offered a “special reward” to anyone who sent them an e-mail with the subject line Full Disclosure. Fully 80% of attendees neglected to opt out of the unappealing lunch option, and only 1% earned their reward.
Of course, the organizers were just joking. This experiment, however, clearly shows that many audience members—well-educated policy experts and government officials—would not fully process the information provided to them, and as a result, they would not make decisions that would maximize their own interests. Inadvertently registering for the soy cheese sandwich and losing out on prizes didn’t indicate that the summit participants were exceptionally irresponsible, stupid, or harmful. They were only acting in their typical human ways.
Sometimes the mere disclosure of unsavory product characteristics is enough to change the behavior of firms and individuals. After the Food and Drug Administration required the disclosure of trans-fat content on nutrition facts labels, in 2006, a study of 229 Americans showed a 58% decrease in the levels of trans-fatty acids found in participants’ arteries, along with corresponding changes in how companies produced and advertised products. [5]
But even subtle changes in how information is presented can have significant and predictable impacts on how people process and act on it. Labeling a food 90% fat-free can have a different effect than calling it 10% fat. There is some evidence that if retirement-plan statements were to present savings in terms of the monthly income that would be available in retirement rather than the current account balance, people would increase their contribution rate.
In conclusion, the impact of information on consumer decision-making is profound and multifaceted. The concept of “smart disclosures” has emerged as a means to empower consumers by providing them with timely access to their personal data in user-friendly formats. Examples such as the Blue Button and Green Button initiatives demonstrate the potential for informed decision-making across various sectors. Moreover, the role of choice engines in simplifying complex data and aiding decision-making cannot be overstated. As we navigate through the abundance of information available, understanding biases and heuristics becomes crucial in making sound decisions. Ultimately, the way information is presented can significantly influence behavior, highlighting the importance of transparent and accessible disclosures in shaping consumer choices and driving positive societal outcomes.