Behavioural Biases at Work:

Implications for productivity and policy

Principal Investigator: Ivan Png, NUS Business School

Co-Investigators: He Shuangchi, NUS Engineering; Zhang Yan, NUS Business

Collaborator: Chua Yeow Hwee, NTU Economics

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Our focus … is not to hold down labour costs indefinitely, but to support efforts by our firms to be more productive and innovative

Lawrence Wong

Minister of Finance

An alternative to innovation – increase productivity of laggards

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Four work packages to investigate the effects of behavioural biases on work productivity

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WP1: Satisficing in food manufacturing industry

How do personality and business conditions explain satisficing?

Context: employment of foreign workers will reduce cost, but many businesses do not reach their quota

Analyse Ministry of Manpower (MoM)’s administrative data to investigate the characteristics of businesses that do not maximize the number of foreign workers

Survey food manufacturers to relate owner / director personality and satisficing behaviour

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2

Approaches

Local workers

Foreign workers

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WP2: Status quo bias in food manufacturing industry

Status quo bias

Attenuated response

How much is the loss of productivity due to status quo bias?

Context: employers were forced to cope with fewer foreign workers during the Covid-19-related restrictions

Analyse MoM’s administrative data to investigate the characteristics of businesses that continue to employ fewer foreign workers post-pandemic

Survey food manufacturers on how they adjusted their employment of foreign workers during and after the pandemic

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2

Approaches

Post-pandemic

Travel restrictions

Foreign worker shortage

?

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WP3: Income targeting (a form of satisficing) in personal transport industry

How does income targeting affect the response to changes in business costs?

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Approaches

Income targeting

Satisficing

Context: Sudden increase in diesel tax, February 2017. How did taxi drivers respond?

Analyse the dataset from large taxi operator.

Preliminary result: 37% of drivers increased cruising, contrary to policy intent.

Survey experiment among taxi drivers: Study their response when posed with random increase in fuel cost.

Cost & earnings

Increase in cost

Behavioural change

?

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WP4: Gambler’s fallacy in personal transport industry

How do people make decisions in sequences of uncertain events?

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2

Approaches

Context: Taxi drivers can acquire customers by cruising on the street or taking bookings

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toss1

toss2

toss3

toss4

Gambler’s fallacy

Survey experiment among taxi drivers: Study bidding pattern subsequent to booking cancellation/completion.

Cruising

Booking

Higher revenue

Risk of cancellation

Analyse the dataset from large taxi operator.

Preliminary result: drivers were more likely to serve booking after a cancelled booking.

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Diverse team

Chua Yeow Hwee

Assistant Professor,

NTU Economics

Zhang Yan

Associate Professor,

NUS Business School

Ivan Png

Professor,

NUS Business School

He Shuangchi

Associate Professor,

NUS Engineering

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Contributions

Social science research

1. Clearer empirical understanding of satisficing, status quo bias, gambler’s fallacy.
2. Same principles applicable to other industries beyond food manufacturing and personal transport.

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Policy

Better design and targeting of policies to achieve desired outcomes

“Work Package 1 … can complement our work with psychological and behavioural elements”

Adrian Chua,

Deputy Secretary, MTI

“relevant to MOM’s foreign workforce policies and would help MOM to better understand the effects of the DRCs and exogenous shocks on the entry of foreign workers”

Poon Hong Yuen,

Deputy Secretary, MoM

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Deliverables

Training

Datasets

Dissemination

• Undergraduate student training -- Survey and fieldwork (not outsourced)
• Graduate student training -- Multidisciplinary
• Junior faculty development

• Survey datasets (anonymized)

• Academic publications
• Outreach
• General public – media
• Industry – food manufacturers, taxi drivers
• Government – engagement with policy makers

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Principal Investigator: Ivan Png, NUS Business School

Co-Investigators: He Shuangchi, NUS Engineering; Zhang Yan, NUS Business

Collaborator: Chua Yeow Hwee, NTU Economics

Thank you.

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9/2/2023

Personal transport

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Behavioural economics

• Application of psychology to economics
• Extensive research on biases among consumers
• Status quo bias
• Sunk cost fallacy
• Anchoring
• Dunning-Kruger effect
• Hot hand fallacy
• Gambler’s fallacy
• Relatively less research on biases in decision-making at work

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9/2/2023

Budget: $1.77 mill

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“useful to quantify the impact of diesel tax on environmental outcomes … While this might be beyond the current scope of Work Package 3, we could estimate the impact based on the results of your study”.

Other agency support

“problem of low productivity is particularly relevant at the small-business level in Singapore. Likewise, behavioural economics is also a wide open field, and has the potential to offer deep insights to policy makers”.

Leong Chi Hoong

Head of Environmental Behavioural Sciences & Economics Research Unit

Ministry of Sustainability and Environment

Yip Chun Seng

Director of Economic and Fiscal Analysis Directorate

Ministry of Finance

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Other agency support

“Land Transport Authority (LTA) would be interested in the outcomes of your research, especially, to the extent that they help taxi drivers make better decisions in their daily work and increase their productivity”.

Leong Wai Yan

Chief of Economics Unit

Land Transport Authority

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