Tim Kraft, Visiting Assistant Professor of Operations Management
Karen Zheng, Associate Professor of Operations Management
Do consumers place a monetary value on supply-chain visibility? Are they willing to pay more for a product that is “socially responsible”?
A new study led by two professors at the MIT Sloan School of Management suggests that the answer is yes – at least to a point. Tim Kraft, visiting assistant professor of operations management, and Karen Zheng, associate professor of operations management, set up a “behavioral lab” that mimicked the dynamics of a real-world supply chain. It consisted of a three-player game, with participants playing the roles of consumer, seller and worker.
The experiment examined whether a consumer is willing to pay more for a given product if the seller provides visibility into its treatment of factory workers. The decisions of all players directly impacted their ultimate payments. So how much of a premium did the “consumers” agree to pay for products of the socially responsible “seller”? How did their actions affect the lot of the “worker”? And can a limited experiment of this type really mirror behavior in the real world?
Both social scientists and policy makers have long puzzled over a basic question: Why do humans so often refuse to act in their own best interests? This ranges from behavior as simple as snacking on chips when we all know fruit is healthier to spending money on extravagant luxuries when we should be saving for retirement.
The answer is that our choices are shaped by both non-conscious processes and the social influences that shape our behavior. “Behavioral science” seeks to unpack these influences and can discover ways to encourage good economic decisions, healthy lifestyles and other beneficial habits. So I, as a behavioral scientist, was heartened to see the Obama administration issue an executive order in September 2015 calling for incorporating behavioral insights into federal policies and programs.
Behavioral science is kind of “cool” right now (cool, for academia anyway). There has been a great deal of mainstream attention paid to behavioral science recently, notably in books like Freakonomics and Predictably- Irrational to columns like New York Magazine’s The Science of Us, and television shows like National Geographic’s “Brain Games,” and various Ted Talks. There’s also increased attention on how behavioral science can move beyond the laboratory, with its interesting, quirky cool studies, to really be used as a tool to help shape behavior and policy. Thus, Obama’s creation of a behavioral science team within the White House could really give a boost to cross pollination between academics and policymakers that could result in public policy that would encourage healthier, more fulfilling lives. This could range from encouraging people to enroll in thrift plans, pay fines that hang over their heads, eat low-fat diets, or get out to vote.
Unfortunately, there has been a chasm between the kinds of tools that we use in academia and the policies needed in the real world. Most people outside of academia do not read the arcane articles in academic journals. But we have some great and interesting ideas percolating in campus “laboratories” that we need to share with budget-strapped policymakers dealing with real-world issues.