3BI: reference points, marathon times, and charitable donations
Welcome to my 3BI newsletter sharing three insights from the world of behavioral science on psychology, decision-making, and behavioral change. Sign up here to have every new edition delivered straight to your inbox.
Reference-Dependent Preferences
Context has a heavy influence on our decisions and evaluations. One example of this is Reference-Dependent Preferences, which posits that we often evaluate outcomes as gains or losses relative to a neutral reference point.
The idea is that many outcomes don’t have an inherent value to us, so we use reference points to determine if they’re good or bad. For example, how an employee views a bonus of $1,000 depends on their reference points, such as previous experiences, expectations, and the social norms of their career. So, how the $1,000 compares to their previous bonuses, current expectations, and the amount received by other employees all influence whether they feel positively or negatively about the compensation.
Cognitive reference points
Reference points aren’t always driven by our own experiences or social norms. They can also be more arbitrary. Cognitive reference points refer to natural stimuli that we innately use for comparison, like round numbers, focal colors, and line orientations.
A fascinating example of this how marathon times tend to cluster around round numbers. In 2015, a group of researchers studied data on the finish times of nearly 10 million marathon runners and found clear evidence of bunching at reference points:
We provide visual and statistical evidence that round numbers (e.g., a four-hour marathon) serve as reference points in this environment and as a result produce significant bunching of performance at these round numbers.
Notice how the numbers spike most dramatically before each 30 minute mark:
Although the four-hour mark is particularly dramatic, qualitatively similar differences exist at other hour and half-hour marks and, to a lesser extent, at 10- and 15-minute marks. There are 50.0%, 21.5%, and 29.5%, more finishers in the 1-minute bin before 3:00, 3:30, and 4:00, respectively, than the 1-minute bin after these round numbers. This excess mass measure for 10-minute marks is less dramatic but still substantial: 11.9%, 8.5%, 9.4%, and 7.0% for 3:10, 3:20, 3:40, and 3:50, respectively.
Fitness app Strava found a similar pattern in an analysis of 2022 finish times:
Why does this bunching occur? While there is some influence from external incentives and pre-race goals, the researchers determined that effort toward the end of the race so as to finish faster than a reference point was the biggest factor:
Bunching is driven by planning and adjustments in effort provision near the finish line and cannot be explained by explicit rewards (e.g., qualifying for the Boston Marathon), peer effects, or institutional features (e.g., pacesetters).
Setting reference points
Decisions can also be influenced by creating reference points when someone doesn’t have clear ones of their own.
A recent study demonstrated this with charitable donations. The study compared charity fundraising results when people were given a menu of donation amounts versus an open-ended request for a contribution. From the WSJ:
…the study included an experiment involving about 900 people. Everyone was told they were eligible to win $25 and could donate a portion of their winnings to charity. Half of the participants then were asked if they would like to donate, and, if so, how much. For the other half, each participant was given seven choices: He or she could give $5, $10, $15, $20, $25, another amount of their choosing or nothing.
The authors found that almost 80% of the latter group chose to donate some part of the $25 to charity, whereas 67.5% of those given the open-ended request chose to donate. The average donation in the group that was given a range of suggestions was also higher—$8.70 vs. $6.77.
This is because the menu of options established reference points where they didn’t already exist:
“Most people want to give the right amount, but determining what amount is ‘right’ is cognitively taxing, so instead they chose to give nothing at all,” says Alice Moon, an assistant professor at the University of Pennsylvania’s Wharton School and a co-author of the paper.
…
“It really does seem that supplying a range of suggested donations helps donors resolve the critical question of how much to give,” says Moon, “and that, in turn, facilitates greater donations.”
Have a great weekend!