How Much Choice Should Consumers Have? | INSEAD Knowledge

The retail sector bends over backwards to give the consumer an inordinate number of product choices, and yet, does the consumer want so much variety?

Variety packs are everywhere, whether they’re multi-coloured sock packs, multi-flavour yoghurts or multi-packs of chocolate bars. Retailers believe that bundling different items together is answering consumer demand, but the reality is something else.  In fact, they would do better to offer more of the same in bundled packs.  We all have preferences, whether it is in terms of our favourite colour, flavour or song, and when we find ourselves in the supermarket aisles, buying in bulk, these preferences make themselves no less felt.

However, as our research shows, a lot of it has to do with how many choices we are actually making when we stand in front of the supermarket shelf.  In my paper, “The Offer Framing Effect: Choosing Single versus Bundled Offerings Affects Variety Seeking” co-authored with Mauricio Mittelman, Eduardo B. Andrade and C. Miguel Brendl, we show that when there is only one choice act to make, participants were systematically less interested in seeking variety in their product choices.  This is the case when we are looking at, for example, a six-pack of soft drinks — in order to purchase six cans, we only have to make one choice if they are packaged together — compared to buying six cans individually where we are making a choice six times over.  The implication for retailers is that you don’t have to indulge in price promotion on multi-packs because by offering consumers more of the same, they will get what they want and be happy to pay the price.

via How Much Choice Should Consumers Have? | INSEAD Knowledge.

via How Much Choice Should Consumers Have? | INSEAD Knowledge.


This is mind-blowing: You have to pay Switzerland to lend it money – The Washington Post

Swiss bonds are the new Swiss banks.

Both, you see, are super-safe places to park your money, so much so that people are willing to pay to keep it there. Now think about this for a minute. It shouldn’t be true. Borrowers usually have to pay lenders, not the other way around, to borrow money. That’s something we like to call “interest.” But it’s not true in the topsy-turvy world we live in today, where investors are lining up to pay the Swiss government for the privilege of lending it money for ten years. Or, in finance-speak, bond yields are negative.

This isn’t really new, though, so much as Europe’s new normal. As the Financial Times points out, €1.2 trillion, or $1.4 trillion, of eurozone debt has negative yields that mean lenders are paying borrowers. But what it is new is just how long people are willing to pay governments to borrow. At first, they only did so for 1-or-2-year bonds. Then, in a sign of how dysfunctional Europe’s economy still is, investors started paying Germany to borrow for five or six years. But now, as you can see above, Switzerland has beaten everyone else to be the first to have negative ten year borrowing costs, at -0.2 percent. And by “first,” I mean in history. This has never happened before.

via This is mind-blowing: You have to pay Switzerland to lend it money – The Washington Post.

via This is mind-blowing: You have to pay Switzerland to lend it money – The Washington Post.

Boosting Demand in the “Experience Economy” – HBR

When Georgia Aquarium opened, in 2005, it was the biggest aquarium in the world. During its first year more than 3.5 million visitors came to see its exhibits, which feature some 120,000 animals spread across 60 habitats in more than 8 million gallons of water. “We didn’t have to do any marketing at all,” says Carey Rountree, the senior vice president of sales and marketing. “It was a case where you’re closing the doors and they’re coming in through the windows.” Demand was so great that tickets were available by reservation only, and waiting times stretched six months or more.

But that changed within a few years. Attendance dropped precipitously, leveling off in 2008 at about 2 million visitors annually. Revenue fell accordingly. People still loved the aquarium, which even with the drop-off remained one of the most-visited tourist destinations in the state. But all experience-based businesses—aquariums, museums, theme parks, and the like—face this challenge: After an initial rush of traffic, they generally see a decline in attendance as the experience loses its novelty. Even when new exhibits, shows, and other activities are incorporated, the pipeline of first-time visitors slows, and repeat visits become less frequent. Georgia Aquarium conducted a study of other aquariums around the country, which confirmed that this was an industrywide problem. So Rountree knew that the solution wouldn’t be a matter of simply adding more attractions.

via Boosting Demand in the “Experience Economy” – HBR.

Institutions and Sustainability

nstitutions, whether political, social or economic ; set the context for individual and group behaviour and are meant to provide the resources individuals need to survive. How people act and live is shaped in large part by the social structures in which they find themselves.[1] Social Justice and Rewarding Courage,  is in part , a matter of ensuring that these institutions through its instruments of intervention and action do in fact satisfy basic human needs.

Many structural forces which are characterized by exploitation and lack of innovation tend to create a system in which people become trapped in a particular social situation. Structural violence often results, in the form of power inequity, poverty, and the denial of basic human rights. Basic human needs go unmet, and groups suffer from inadequate access to resources and exclusion from institutional patterns of decision-making.[2]

Many sustainability professionals are fearful about the scale of the challenges facing the world, but this uncertainty can help generate the energy required for courageous action. While the desire to concentrate on finding practical solutions is understandable, it makes sense at the same time to also recognise and step towards our deepest fears, which can feel akin to taking a leap into a bottomless abyss.[3] Former US President Bill Clinton illustrated some of the nuances of uncertainty and sustainability in his talk at University of Oxford in 2012. Bill Clinton said that the most important change that needs to happen to confront the sustainability challenges of our age is to raise the consciousness of the world’s population. He said it was a good thing that we did not know for sure whether the calamitous cocktail of climate change, resource scarcity, ecosystem degradation and population growth would lead to an end of civilisation as we know it.[4]

Creating Shared Values with Institutions

When the expression “sustainable development” was coined in the report of the World Commission on Environment and Development in 1987, it was defined as “… development to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987). From a legal perspective, sustainable development has been defined as “a comprehensive economic, social and political process, which aims at the sustainable use of natural resources of our planet and the protection of the  environment on which nature and human life as well as social and economic development depend…” (International Law Association, 2002).

The task of identifying a common framework for institutions to be effective in leading the path to sustainable world order is not easy. One important observation that could be drawn from available literature is that Institutions of any kind , now have to create shared values to achieve this task. Michael Porter and Mark Kramer has talked about creating shared value in business and corporate strategy in their award winning article in Harvard Business Review.[5] The article talks about purpose of corporation to be creating shared value and how to achieve that. In recent years business increasingly has been viewed as a major cause of social, environmental, and economics problems.

The question is how to transform the institutions to be being in virtuous circle of sustainable development. In this essay I propose a framework to which institutions should look into to bring that change and create shared value. The three wings of that change would be the following:

Sustainability and Education: Fostering organizations for sustainable economics and management .

Fostering Innovation : Fostering a culture of Innovation that is centred around driving business models  which bring in societal change.

Rewarding Courage: A focus on rewarding courage to stay the course in the times of adversity and uncertainty and even to take discomfort.


Exhibit 1:  Three Pillared Framework for transforming the Institutions

Sustainability and Education

Education is a prerequisite for promoting the behavioural changes and providing all citizens with the key competences needed to achieve sustainable development. Education and training should contribute to all three axes of sustainable development, namely:

The Social perspective – education and training strengthen social cohesion by investment in human capital;

The Economic perspective – education and training contribute to building a knowledge society based on sustainable economic growth; and,

The Environmental perspective – education and training are crucial for changes in citizens’ behaviour on issues such as: consumption, transport, use of sustainable energies, etc.

Knowledge, Values, and Education are fundamental to all the changes that have been considered is a major transformation of human awareness. This shift in attitude and thinking, which is already underway, involves a new intellectual understanding One of the key initiatives that many universities around the world has taken,  is to foster student organizations who acts as agents for sustainability to bring in curricula change and motivate the academic and student community for sustainable development. One such organization is oikos , which with its chapters around the world is increasingly creating awareness on sustainability and coming up with tangible deliverables to bring in the change. My personal experiences as President of a oikos local chapter in New Delhi has been immensely fruitful in terms of generating a knowledge bank in the university and spreading the word on sustainability . While doing so there have been many instances when we were able to partner with a variety of organizations to create projects which would in future keep generating insights in the area of sustainability. Institutions today need to realize the fact that education right from the very beginning of one’s formal education and  has to absorb the true values of sustainable development.

If the positive changes and are to continue and intensify, the driving force will be an awakened, concerned, and mobilized global civil society. Governments and corporations will respond to voter and consumer demand, and a vibrant global people’s movement could inspire endless variations on the theme of sustainable development.[6]

Fostering Innovation

It has to be now understood well by all kinds of Institutions that the next phase of innovation lies in the fact that new business models need to be driven for societal change and not economic value added. In fact economic value should be drawn by designing new products and services which can bring societal change in turn generating economic value. Creative thinking has always been integral for improving well-being. (Lemelson – MIT Program, 2003 )

As the world’s largest democracy, with a diverse population of more than one billion, India has become a key testing ground for sustainable development. Most of the media attention has been focused on the country’s pockets of urban, English-speaking university graduates who are “piggybacking,” capitalizing on the Internet and decreasing telecommunications costs to capture hundreds of thousands of software and customer service jobs from overseas, at a fraction of American or European wages. The high-tech start-ups of Bangalore have been heralded in the press. Corporations such as GE and IBM have even opened R&D centres there, employing PhD-level engineers who are helping to invent and improve info tech, biotech and nanotech.[7] There are various case studies available similarly for China[8] and Africa[9] which talk about Innovation for Sustainable Development.

The proposed framework envisions a world where Science and Technology work more directly for social justice, poverty alleviation and the environment. This requires innovation which is transformative – reshaping social and power relations to allow innovation in new directions. It means innovation for sustainability, paying attention to ecological integrity and diverse environmental and social values. It means that the benefits of innovation are widely and equitably shared, and not captured by narrow, powerful interests. It means encouraging open and plural forms of innovation pathway – social and technical; high tech and low tech; those which are currently hidden, as well as those which are more commonly recognised. It means organising innovation in ways that are networked, distributed and inclusive, involving diverse people and groups, including those who are poor and marginalised. As a result, this is a world where all feasible directions for scientific, technological and wider social innovation are discussed as matters for legitimate political argument, just as in other areas of public policy. It is a world where scepticism over some particular innovation pathway can no more be excluded as indiscriminately ‘anti-innovation’ than opposition to any specific policy is generally ‘anti-policy’.  It is a world where a deliberate diversity of innovation pathways flourish and interact. What is needed is nothing short of a vigorous new critical glob al politics of innovation.[10]

Rewarding Courage

The recent global financial crisis and ensuing recessions placed a premium on strong, effective and “sustainable” leadership. Although people tend to measure wealth in terms of the dollar value of a portfolio, we believe it is better to measure wealth in terms of the real spending that the portfolio can sustain over the entire life of the obligations served by the portfolio. Sustainable spending[11], is an expression used  to gauge this true value of a portfolio. Jim Garland used the term “portfolio fecundity,” to describe much the same concept.[12]

Many people felt jubilation at the peak of the tech bubble, because they felt so wealthy. And they were—as long as they were inclined to liquidate their holdings and spend before the market lost its euphoria. If they were still investing (e.g., for some future retirement), those new purchases bought precious little yield! Reciprocally, people felt panic and dismay at the 2009 trough of the financial crisis, because they felt as if their assets had been wiped out. And they were—if they intended to liquidate and spend their assets immediately. But, for the buy and-hold investor, their real income was higher than at the 2007 peak!

Focus should be on creating enough incentives to rebalance into higher yielding assets after they’ve cratered, presumably funded from assets that have performed much better, we can systematically ratchet our sustainable spending ever higher. This ground is amply explored in asset allocation literature. Indeed, the essence of Tactical Asset Allocation (TAA) is an effort to rebalance into investments when they become most uncomfortable, and are therefore priced with a superior risk premium, to reward those who are courageous enough to invest at such times.

Much of these incentives has to come from the policy makers of the world. Rebalancing into the most feared and loathed stocks, and out of the most beloved high-fliers, requires courage—even if we get a “raise” almost every time we do it! Andrew Ang of Columbia labels this “countercyclical investing.” He calls on long-term investors to institutionalize this kind of contrarian behaviour.[13] If we have the courage to do this, even though it creates discomfort and goes against human nature, it far better aligns our investments with the long-term obligations that they are intended to serve.

Institutionalizing a focus on sustainable spending, as a basis for gauging our investments over time, can help give us the courage to stay the course in adversity and even to take on more discomfort when it is most profitable—and most frightening—to do so.

[1] E. Franklin Dukes, “Structural Forces in Conflict and Conflict Resolution in Democratic Society,” in Conflict Resolution: Dynamics, Process, and Structure, ed. Ho-Won Jeong. (Vermont: Ashgate Publishing Co., 1999), 159.

[2] John Paul Lederach, Building Peace: Sustainable Reconciliation in Divided Societies. (Washington, D.C., United States Institute of Peace, 1997), 83.

[3] Jo Confino , For sustainability leaders, embracing uncertainty can be rewarding, The Guardian (July 2012)

[4] Jo Confino , Live blog from Oxford University: Day two on food, water and energy for all, The Guardian (July 2012)

[5] Michael E. Porter and Mark R. Kramer, Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth. Harvard Business Review (January- February, 2011)

[6] Steven C. Rockfellar, Vision, Courage and Sustainability, The GEA Conference for a Sustainable Future (October 2003)

[7] William Bulkeley,  IBM to export highly paid jobs to India, China, page 1, Wall Street Journal, page 1, (December 15, 2003.)

[8] “China’s Second Wave: Country is Now Poised to Flood World Markets with High End Products Like Cell Phones and Autos,” by Jehangit Pocha, The Boston Globe, Page D1, January 2, 2004.

[9] Innovation for Sustainable Development , Local Case Studies from Africa, United Nations DESA, New York (2008)

[10] STEPS Centre (2010) Innovation, Sustainability, Development: A New Manifesto, Brighton: STEPS Centre

[11] Arnott, Robert D(2004) Sustainable Spending in a Lower-Return World, Financial Analysts Journal, vol. 60, no. 5 (September/October)

[12] Garland, James P., 2004, “The Fecundity of Endowments and Long-Duration Trusts,” Economics and Portfolio Strategy, September 15.

[13] Ang, Andrew, and Knut N. Kjaer, 2011, “Investing for the Long Run,” November 11.


INTERNATIONAL LAW ASSOCIATION (2002) Legal Aspects of Sustainable Development. Fifth and Final Report of the International Law Association’s New Delhi Conference, London: International Law Association.

INVENTION AND INNOVATION FOR SUSTAINABLE DEVELOPMENT (November 2003)  Report of a workshop sponsored by the Lemelson-MIT Program and LEAD International,  London , THE LEMELSON-MIT PROGRAM, School of Engineering, Massachusetts Institute of Technology 

WORLD COMMISSION ON ENVIRONMENT AND DEVELOPMENT (1987) Our Common Future. Oxford: Oxford University Press.

The austerity question: ‘How’ is as important as ‘how much’ | vox – Research-based policy analysis and commentary from leading economists

Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs.


The European debate on fiscal austerity has gone astray – focusing exclusively on the size of deficit reductions. What policy makers should really be focusing on is the budget tightening’s composition�(tax versus spending) and on the accompanying policies. Indeed, the title of this Vox debate – “Has austerity gone too far?” – reflects this inappropriate emphasis on size.

In our view, the essential question is not ‘how far’ governments go but of ‘how’ they go far enough.

Evidence on new taxes versus new spending cuts

Economists have engaged in some lively debates about how to measure and evaluate the effects of large fiscal adjustments episodes in OECD countries (Europe in particular). But a careful and fair reading of the evidence makes clear a few relatively uncontroversial points, despite the differences in approaches. The accumulated evidence from over 40 years of fiscal adjustments across the OECD speaks loud and clear:

via The austerity question: ‘How’ is as important as ‘how much’ | vox – Research-based policy analysis and commentary from leading economists.

via The austerity question: ‘How’ is as important as ‘how much’ | vox – Research-based policy analysis and commentary from leading economists.

Government Intervention in the Economy

Statue of Liberty Gaeilge: Dealbh na Saoirse

Statue of Liberty Gaeilge: Dealbh na Saoirse (Photo credit: Wikipedia)

Economy is akin to the freeway, though on the freeway there is a speed limit and traffic signals to regulate the traffic. And of course police to book the offenders. The economy, too, should have limits, regulators, and the law to book offenders.

If we base our analysis on methodological individualism, subjective rationality and inherent unpredictability of economic system to properly analyze the Government role in society we have to conclude that, beyond the point of maintaining the basic framework of law and order, government’s role in society is very limited. One single intervention is unlikely to produce a solution to deep-rooted economic and social problems and thus policy makers often try to build a variety of policy, policies that work on market demand and market supply.

Economists have referred innumerable times to the “free market,” the social array of voluntary exchanges of goods and services. But despite this abundance of treatment, their analysis has slighted the deeper implications of free exchange. One of the most lucid analyses of the distinction between State and market was set forth by

In his book The General Theory of Employment, Interest and Money (1936), John Maynard Keynes set forth a series of theories that have come to be known as “Keynesian economics,” whose major implication for the public and for governments was that recessions and depressions are not simply natural events that will eventually correct itself, but rather a problem that must be solved by direct government intervention in the economy, by deficit spending and other measures.. He pointed out that there are fundamentally two ways of satisfying a person’s wants: (1) by production and voluntary exchange with others on the market and (2) by violent expropriation of the wealth of others. The first method Oppenheimer termed “the economic means” for the satisfaction of wants; the second method, “the political means.” The State is trenchantly defined as the “organization of the political means.”

Economists usually make a common mistake, that extensive modeling, statistical and empirical coverage of events is enough for proper design of any system. Economics is a social science and the effects of intervention cannot be calibrated / forecast with great accuracy , people’s behaviour is subject to change as one can infer that from the ‘law of unintended consequences’. If we live in such undetermined and unpredictable world, with limited knowledge and limited ability for proper economic analysis, one cannot be sure about the policies that are being proposed.

On my To- Read Pile

• The Economist sees (and raises) (Michael Pettis)

• India’s economic monsoon (FT Alphaville)

• The mirage of free-market roads (Atlantic)

• The bathtub model of unemployment (Liberty Street)

• A conversation about economic inequality (Triple Crisis)

• The role of speculation in oil markets (Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva)