Choice Architecture in business and what it tells us about the brain
Sanjana Koushik ’22 NU and Jim Stellar
In our first blog, we explored how Kahneman’s model of decision-making plays a role in the thinking of business leaders, and how our cognitive systems in general guide our judgments both rapidly and intentionally. But beneath these conscious and subconscious processes lie deeper forces: neural circuitry, emotional triggers, and the subtle cues embedded in the environments where decisions are made.
In a society where marketing and storytelling is at the forefront of interactions, and thousands of options present themselves, we make hundreds of decisions each day – what to eat, where to travel to, which emails to open, and when to purchase a product. While freedom of choice is not diminished and we are enabled to think critically about benefitting from our decisions, our choices are often shaped by subconscious forces that guide our behavior. Although human behavior can often be unpredictable, as we previously discussed, behavioral science studies have shown that people tend to respond in surprisingly consistent ways when nudged similarly.
This brings us to something called choice architecture, a concept that the design and organization of choice presentation or context of decision-making can subtly influence behaviors. Let’s take the example of your local supermarket that you head into for your weekly stock of groceries. You know that you want whole wheat bread to make sandwiches for lunch, but there are over twenty brands and options, cognitively overwhelming you as you scan the aisles. Fatigued, you are likely to turn towards structures and incentives that catch your eye to get through the decision more rapidly. Firstly, your eyes might turn to items positioned at your eye level (4-5 feet from the ground), often prime real estate reserved for high-profit items. That technique increases visibility and elevates purchase likelihood overall. Similarly, sugary cereals and toys might be placed 2-3 feet from the ground to catch the eye of your niece, encouraging impulse buys by understanding the behavior of target audiences. Your eyes also might turn to the bright red letters next to the “Sara Lee” brand labeled as “2 for $7!”, motivating you to impulsively place these loaves in your cart rather than recognizing that the bread is actually just $3.50 for a loaf, meaning you could have just bought one loaf or bought bread from the Whole Foods brand itself.
On a greater scale, the framing of information to emphasize gains over losses, the structure of key words, default options, and strategic nudges can have great impacts across healthcare, public policy, and media or entertainment. In a 2018 pen-and-paper experiment conducted with ~900 college students in Switzerland, participants were either given a prepopulated list of five charities or not. Exploring the impact of choice architecture on charitable giving, researchers found that the average donations (of hypothetical income) doubled, and the share of participants donating rose from ~22% to 44%. This was a clear demonstration of the broader nudge theory, intersecting behavioral economics and messaging design. It once again reaffirms the applicability of choice architecture and how it can influence behavioral shifts, even without external incentives in the donation context.
This leads to the question- why do we humans respond consistently to these nudges? How are we affected by choice architecture in business and elsewhere? Or, how are our brains built to allow such unconscious influences to occur? As we have mentioned in the opening by discussing Kahneman and in previous writing, we seem to have at least two systems in our brain. First, the cognitive planning, intelligent, and most recently evolved part of our brain, the neocortex makes these abstract decisions. It operates on an evolutionary new structural organization of interacting cortical columns. In this way, it may be parallel to the artificial neural networks that underlie artificial intelligence (another topic).
But the neocortex gets input from the older limbic system about the value of decisions or planned decisions that we might make. The limbic system was guiding motivation in evolutionary more primitive animals before the cortex developed, and it operates on a homeostatic principle of maintaining a physiological balance. For example, we eat when we are hungry and drink when we are thirsty and under this motivation food or water becomes valuable.
The neocortex gets this value input on every action but it does not get the process by which the limbic system has made that judgement. That can lead to efficiencies, like having emotions help guide a decision when too much information is in play to make it a thoughtful decision, or when there is not enough time for that. This phenomenon was written about by Damasio and featured some of his neurological patients in his famous book, Descartes’ Error. Higher level social inputs of loyalty, fear, and trust can also shape our logical planning decisions, indicated by Kahneman through greater detail in this video. Another example of how the limbic system’s input can impact decision-making is seen in PTSD patients, who may struggle in therapy to remain mindful and avoid being prisoners of their cognitively-stored past trauma. The bottom line here is that choice architecture is what we sometimes call brain-natural, influencing and working in all of us.
To take a step back, while this design and structure can be a powerful tool for businesses and public organizations to improve outcomes for the public, the concept raises ethical concerns, as many researchers hold the contention that a helpful nudge can often cross the line into manipulation. The ability to influence behaviors by tapping into the brain’s most intricate structures can infringe on the autonomy of an individual, begging the philosophical question of free will and decision-making free of coercion. While business and platform owners bear the responsibility of applying these behavioral science principles with transparency and integrity, individuals can also slow down, as Kahneman says in the video above, and take active steps to make intentional choices for themselves. We should recognize that our perception of reality is shaped by how information is structured, where products are tactically placed, and what voices or faces are chosen to endorse them. Developing awareness of this architecture and questioning default options allows us to reclaim greater control, ensuring that our decisions do align with our values and long-term goals.
Of course, this is a great topic for our next blog.
