Question

Determine whether each of the following changes represents a shift in the choice architecture of a decision. [LO 23.1] a. After presenting the dessert menu to patrons, the waiter at a restaurant mentions that there's an additional option for dessert not on the menu. b. A restaurant presents dessert menus to patrons before they have eaten. c. A waiter shows patrons a menu without prices. d. A waiter asks patrons whether they would like to order more fries after telling the couple that the plate of fries is very small.

Short answer

All scenarios represent a shift in choice architecture.

Step-by-step solution

Understand the Concept of Choice Architecture

Choice architecture refers to the way choices are presented to individuals. It involves structuring the environment in which people make decisions to influence the outcome in a predictable way without removing options. Shifts in choice architecture occur when the environment or context in which decisions are made is changed, potentially altering the decision outcomes.

Analyze Scenario a

In scenario a, the waiter introduces an additional dessert option that is not on the menu. This represents a shift in choice architecture because the waiter is changing the set of available options by adding an alternative that the patrons were not aware of when initially presented the menu.

Analyze Scenario b

In scenario b, dessert menus are provided to patrons before they have eaten their main meal. This is a shift in choice architecture because the timing of when the dessert options are presented is altered, potentially affecting patrons' future dessert choices by attracting their attention early.

Analyze Scenario c

In scenario c, the waiter shows the patrons a menu without prices. This is a shift in choice architecture since it alters the decision-making environment by leaving out price information, which might influence the patrons' tendencies to make decisions based on perceived cost.

Analyze Scenario d

In scenario d, the waiter highlights the small size of the fries when asking patrons if they would like to order more. This is a shift in choice architecture because it changes the way the choice is framed, potentially influencing the patrons' perception of the value or necessity of ordering more fries.

Key concepts

Decision Making

In the realm of decision making, our choices are often influenced by how options are presented to us. This process involves evaluating different alternatives to arrive at a conclusion that best aligns with our goals or desires. For example, when you're deciding what to order at a restaurant, a variety of factors play a part in the decision-making process:

• The available choices or menu items
• The way in which they are described
• The timing of when these options are presented

These subtle cues can steer your decision in one direction over another. Understanding the intricacies of decision making helps us recognize when our choices are being subtly influenced, often without our conscious awareness.

Behavioral Economics

Behavioral Economics merges insights from psychology and economics, exploring how people actually make decisions in contrast to how we assume they make them. In scenario analysis, it helps to understand why choices might deviate from purely rational expectations.

Real-World Application

For instance, the waiter highlighting the small portion of fries taps into loss aversion, a common behavioral economics principle where people tend to prefer avoiding losses rather than acquiring equivalent gains.
This tool can be used to understand behavior beyond conventional economic predictions by explaining why a customer might choose to order extra fries even when initially hesitant due to perceived scarcity.

Consumer Choice

Consumer choice involves the selection of goods or services from a set of available options. In restaurants, as in our scenarios, consumer choice is dynamic and influenced by elements like menu configuration and the additional options the waiter might present afterward.

Factors Influencing Choice

• Menu variety or the range of options presented
• Information such as price, or, as in scenario c, the lack thereof
• The way a choice is framed, such as emphasizing limited-time offers

By understanding consumer choice, we better comprehend why patrons might choose one dessert over another or decide on a second helping.

Influence of Context

The context in which choices are offered greatly influences decision outcomes. Context encompasses the environment, timing, and the sequence in which options are presented.

Contextual Shifts

Consider scenario b, where dessert menus are presented before the main meal. This shift may cause patrons to pre-commit to a dessert, altering their overall meal experience.
The context influences whether individuals lean toward different option sets entirely, highlighting how seemingly minor tweaks can lead to shifts in consumer behavior.

Choice Presentation

Choice presentation refers to the manner in which options are displayed or communicated. It is a critical aspect of choice architecture, as it can shape perceptions and ultimately influence decisions.

Key Aspects of Presentation

• The sequence and timing of option presentation
• The framing of options, such as highlighting positive versus negative attributes
• The clarity and completeness of information provided

In the analyzed scenarios, choice presentation is evident in techniques such as mentioning additional options or omitting price details, techniques used to subtly guide consumer decisions.