Carmen Losada

Behavioral Economics Theories in the Colombian Navi Market

Started June 23, 2022

Abstract or project description

For this project we tested out the Nudge Effect, Default Effect, Decoy Effect and Framing Effect in the Motorcycle market in Colombia. Specifically in the Navi market which is a customizable motorcycle and scooter hybrid by Honda that can be personalized. We worked with Honda to perform different studies using online surveys to see how changing different aspects such as the default, number of options, and nudges, affect people's decisions.

The first experiment that we preformed was to test the Framing Effect on Navi costumers. To test out this effect we decided to design two questions. We wanted to test out if clients would gravitate more towards choosing an option if it included the word “free”. To do this we framed two options differently against the same second option. We gave participants the option of receiving $3,150,000 pesos (around 695 dollars) or receiving a Navi motorcycle with a retail price around double that amount except one of the frames had the word "free" in it and one did not.

The second experiment that we preformed was to test the the Nudge Effect. To test this theory we decided to design a question to analyze if adding the nudge “popular” to an option would make a person more likely to choose it. We did this by focusing specifically on motorcycle color, labeling the red one as popular to see if participants would choose it more often.

Thirdly, to test out the Default Effect in the Navi market, we designed two questions. In the first one participants start with a fully accessorized motorcycle and are asked what accessories they would like to remove from the motorcycle. In this case, the default would be a fully accessorized motorcycle which participants would have to personalize to make it less accessorized. In the other case, participants will start with a bare motorcycle and will be asked to add on any accessories that they want. In this case, contrastingly, the default is a bare motorcycle which participants will need to personalize by adding to it.

Finally, To test the Decoy Effect in the Navi market we decided to create two questions, one with a decoy and one without. For the first question we gave the customer two options regarding the price and accessories of a motorcycle. On the other hand, for the decoy we gave the costumers a third less attractive choice to see how this would influence their decisions.