Monday, April 8, 2013

Influence, Chapter 1

I finally got around to reading Robert Cialdini's Influence: The Psychology of Persuasion.  This classic is recommended reading for anyone, but especially social scientists.  In this series, I summarize the book and inject its contents with economics.

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Chapter 1 is about the contrast principle.  In a nutshell, people systematically overestimate differences.  
  • A realtor might intentionally show you a crummy house before showing you a nice one.  If all goes to plan, you will have an unbiased opinion of the first house, and you will subsequently overestimate the difference in quality between the houses, meaning you will overestimate the absolute quality of the second house.
The contrast principle means that your estimate of the second house is biased away from the first house.  

(By the way, if you're looking to purchase some real estate, these days it is easy to do a lot of the preliminary work yourself.  The internet makes it easy to cut the realtor out of the initial stages of figuring out which properties you are interested in.)

The sequential, asymmetric nature of the principle comes out in full force when we consider sequential purchasing decisions:
  • Suppose you want to buy both a sweater and a suit.  The salesman will want to sell you the $400 suit first, after which a $70 sweater will seem cheap.  The sweater doesn't have the reverse effect on the suit because by then you've already bought (or committed to buying) the suit and written it off in your mind.
  • When buying a car, the salesman will steer you to fix on a base price before even considering the mountain of options.
  • In another vein, if you have some bad news to report, you might think it's better to build up to it, to cushion the shock.  But the contrast principle suggests that putting the bad news last will actually exacerbate the shock and exaggerate the severity of the bad news.

To an economist, what seems to be missing here is a discussion of the subject's prior beliefs.  Suppose house quality is measured on a scale of 1 to 10, with the crummy house a 2 and the nice house an 8.  Cialdini's story is:
  • The subject sees a 2, recognizing it as a 2.
  • The subject then sees an 8, instead thinking it is a 9 due to the contrast principle and having first seen a 2.
But what about the subject's prior expectations about house quality?  I'm not saying the contrast principle is "wrong," but it could be that it works by contrasting house qualities with prior expectations of house quality, rather than the prior house viewed.  Consider this alternative story:
  • Beforehand the subject expects to see a house of quality 5.
  • Subject sees a 2, consequently revising prior down to 4.
  • Subject sees an 8, instead thinking it is a 9 due to the contrast principle and having had a prior of 4.    
These stories give the same qualitative result here.  The realtor should show the 2 first.  But that doesn't have to be the case. What if the crummy house were not a 2 but instead a 7, higher than the prior of 5?

Now in the second story, showing a 7 would raise the prior from 5 to 6, reducing the contrast between the prior and the nice house with quality 8.  This contradicts Cialdini's version, which says that if you have a 7 and an 8, showing the 7 first will raise the subject's impression of the 8.

That is an easy and important experiment to run, and an obvious one to economists, I think.  Philosophically, this is a good example of economic versus psychology paradigms (though not necessarily a criticism of either).  It is very difficult to generate bias on average within an economic model.  Cialdini's version of the contrast principle creates bias on average, while my version potentially does not.

Perhaps, it is best to build up to bad news after all, if you are looking to cushion the blow.  Really bad news is usually unexpected, so you might want to move their prior in that direction more gently first.

4 comments:

  1. In my limited experience shopping for houses I think the second house I view does impact my retrospective opinion of the first house I viewed. If the second house is better then I downgrade my evaluation of the first one, increasing my perceived contrast between the two. I think this is related to the idea of anchoring - e.g. when people are asked to estimate the height of a very tall building they can be influenced by numbers that are spoken to them before they make their estimate.

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  2. Robert, I see no reason why that shouldn't be the case, although I do not know the data firsthand. Cialdini implies it is not true, but in fairness it doesn't seem to much matter in the cases he discusses. You aren't going to buy the crummy house anyway so who cares if you downgrade it further. And the decision to buy the suit has already been made before you consider the sweater, and even if it seems more expensive in retrospect, the salesman has already won.

    In any case, it is an important piece of a more general understanding, I would agree.

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  3. Another example of interest is graduation gowns. At UChicago, they sell them for $675... at that price, the $60 rental (for one day) seems like a bargain!

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  4. Gosh, it costs less to rent a *car* for a day, though I suppose that bespeaks the wonders of competition more than anything else...

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