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Hi.
My name is Ido Erev,
I'm a Professor of Behavioral Science
at Technion in Warwick Business School.
I'll talk today about my research
on the mixed effect of incentives
and the role of experience and regret.
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The starting point of my research
is the observation
that study of the effect
of economic incentive
on human behavior reveals
an apparent gap
between successful inventions
and interesting discoveries.
Most successful inventions
can be described as a method
that reduces conflict
under the assumption
that people try
to maximize expected return.
The most important invention probably
in the social sciences
that will distinguish us
between us and animal
is the inventions of trading and market.
Think, for example,
of going back 100,000 years ago
when two of our grandparents
were going fishing
and one was successful
and the other was unsuccessful
and assume for a minute
that they were from different tribes.
It is most likely
that the less successful ones,
the ones that didn't have any fish
will try to steal
some of the fish
from the more successful one
just like other animals do still today
and they may get into a fight,
and may be one will get wounded,
and may be one can get killed.
But then some time,
we're not sure exactly when,
people came up with the idea of trading.
So if one was successful at fishing
and the other one was unsuccessful,
but still found some berries
or something,
so maybe the one that had the berries
could offer the other person
the berries in return of one fish
and that really reduces the risk
as a need to be aggressive.
I'm not sure
that it was a social scientist
who came up with this idea,
may be this was a discovery by mistake,
but it really had a good effect,
and it was effective
because it maximized
the return for both people.
And much later, about 3,000 years ago,
people came up with the idea of money
that facilitated trade.
And a little bit earlier, people came up
with the idea of law and enforcement
also as a method
to reduce the risks
that people would be aggressive
to reduce risk of violence,
and more recently people come up
with the idea like banks
and recently idea like Uber
and GetTaxi method
that improve coordination
between passengers and drivers.
As I said, all these inventions
can be described
as a method that reduces conflict
under assumption
that we people want to do
as the best for themselves,
that is, maximize expected return.
