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  • 31st May 2023

Want to protect consumers? Understand what makes them tick

Consumer protection is key, according to the White House. From giving mobile users greater choice over where they get their apps to banning surprise “resort fees” foisted on would-be vacationers at the last second, federal initiatives span across consumer-facing markets and dozens of agencies. The idea is that removing irritants that consumers face will improve market competition. 

As experts in behavioral economics, the field of research underpinning these initiatives, we agree. 

How Studying Behaviour Can Lead to Better Practices

Behavioral economics explains how and why we actually take notice of information—undercutting the claims of companies that we are reading all the Terms and Conditions, for example. It shows how even small changes to the way that companies present choices can make us behave in ways that pad their profits.

Pop-ups telling us how many people are looking at the items in our baskets. Timers counting down in the background. Subscriptions with no cancellation button to be found. Or the bottomless feeds and auto-playing videos that keep us hooked on scrolling for just a few minutes more. These are known as “dark patterns” or, in the words of the White House, “manipulative design techniques.”

By carefully studying behavior we can tease apart these techniques, show the harm they can do, and suggest a better way forward. We’ve seen this firsthand in our work.

Take DIY stock trading apps aimed at first-time investors. Many of these apps turn investing into a game-like experience. Elements like reward points or animations celebrating completed trades keep users engaged.

When our organization created a simulated trading platform, we found that giving people the chance to earn valueless reward points increased trading volumes by 40%—behavior that is not likely to benefit users. 

It’s not just investors who are at risk. Earlier this year, the Federal Trade Commission announced that Epic Games, the creators of Fortnite, must pay $245 million because they “used dark patterns to trick players into making unwanted purchases and let children rack up unauthorized charges.” 

To provide just one example, they removed a prominent “undo” button that was used to cancel accidental Fortnite purchases. Instead, they buried a much smaller version of it in the bottom right corner of the screen and required users to hold down the button for the cancellation to go through (adding “friction” to the cancellation process). The potency of Epic Games’ dark patterns and the sheer number of consumers affected have led the FTC to order this massive refund—the largest administrative order in its history. 

There are countless tactics like these that may harm consumers and prevent competition across markets, but their effects are not always obvious. For example, messages on accommodation sites that say “Only two rooms remaining!” might be a source of useful information, but they can also impose an undue sense of urgency on consumers, who may then rush to make a purchase they later regret. This technique, known as a “scarcity claim,” exploits a quirk of our psychology and is an example of why it is important to study these techniques and measure their impact. Once we understand the science behind dark patterns we can counter them more effectively. 

Some consumer protection problems may require bigger investments than redesigning buttons on websites. Businesses incur major costs each year dealing with “phishing”—a deceptive technique to acquire valuable information online. When our colleagues phished the officers of London’s police force (by invitation), they found that they could design a short training email that greatly reduced the number of officers clicking on phishing links we sent, with the effects lasting for at least three months. 

Or take the issue of Terms and Conditions, where we all click “Accept” to say we’ve read them (but few of us really do). More people read them if they are designed in line with how we comprehend information. Just telling people how long it would take to read a policy can double open rates. Creating summary bullet points with icons improves rates of understanding by a third. 

These examples show that behavioral economics offers many options for reducing exploitative practices that governments could explore. That’s just as well, since bans won’t work for practices that are fluid and tough to define. And these changes will have benefits beyond helping hard-pressed individuals: they help markets work better and companies compete fairly, which benefits us all.

Take a look at our services to see how we tackle these projects, from Understanding Behaviour to Creating and Implementing Solutions.