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A better understanding of individual behavior in complex choice situations can lead to better policies

Published: 03rd September 2019 Last updated: 06th September 2019

People take complex decisions every day. Complexity can arise because of a lack of information, because the optimal choice highly depends on personal factors, or because many interdependent decisions have to be taken at the same time.
In order to make the right policy decisions, we need a sound, empirically quantified understanding of the way in which individuals take decisions in such a context. In his inaugural address, to be delivered on September 6, Professor Tobias Klein will illustrate how we can learn about individual decision making by combining models of individual behavior with (big) data and how this can in turn inform policy making.

Health Insurance in Peru

The first example concerns people’s reactions when the government introduces health insurance in Peru. Research shows that this results in them going to health centers more often to ask a doctor for advice. This in turn makes them more inclined, when necessary, to pay for an operation by a specialist, even if it is not covered by the insurance. In contrast, those who are not insured do not go to the health center and are therefore not informed that they should undergo treatment, which results in fewer medical procedures being carried out by specialists. In many cases, this is an undesirable situation that could be remedied by expanding coverage that provides free advice to patients.

Financial incentives in health care

The second example involves the presentation, or framing, of financial incentives in health care. Research shows that people react more strongly to very similar financial incentives if these are presented in terms of a deductible rather than as no-claim refund, as was standard in the Netherlands until 2008. This shows that it is not only important to design financial incentives in the right way, but also how these incentives are presented to patients.

Advertising as a reminder

The third example is about targeted advertising. People sometimes forget to make a purchase they had planned on making. In that case, an advertisement can remind them, and they will be able to make the purchase after all. Research shows that people indeed often do this online. This suggests that also the government could use advertisements to remind people to take a look at their health insurance policy or their energy contract, thereby furthering competition.

Note to the editors

Professor Tobias Klein will deliver his inaugural address on Friday, September 6, at 16:15 hrs. in the auditorium of Tilburg University. Title of the address: Individual behavior in complex choice situations. For representatives of the press, the text of the address is available beforehand under embargo. For more information, please contact press officer Annemeike Tan, tel. 013 – 466 2596, e-mail a.m.tan@tilburguniversity.edu.