Misbehaving

Thaler recounts his productive collaboration with Danny Kahneman and Jack Knetsch in Vancouver, where they explored the concept of fairness in economic transactions. This collaboration was enabled by a unique arrangement with the Canadian government, which provided them with free telephone polling for their research. They were able to test various scenarios on random samples of residents in Ontario and British Columbia, receiving feedback quickly and refining their hypotheses.

Thaler and his colleagues investigated how ordinary people perceive the fairness of pricing decisions made by businesses, particularly in response to changes in market conditions. For example, they found raising the price of snow shovels after a blizzard was considered unfair by a vast majority, even though economic theory suggests prices should rise in response to increased demand. This contrasted with the response of Thaler’s master of business administration (MBA) students, who, educated to think like Econs, found such price hikes acceptable.

Their research further explored how the framing of price changes affects perceptions of fairness. For instance, removing a discount was viewed more favorably than adding a surcharge, even though the economic outcome was the same. They also discovered that perceptions of fairness are tied to the

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