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Prius owners.

Snapshot, the usage-based automobile insurance program, offered by Progressive calculates rates based on three criteria that are largely out of a driver’s control. Mileage traveled, time of day you drive, and speed of braking. That last category is an opportunity for Prius owners, old and new, to showcase the habits they’ve picked up while paying attention to the car’s feedback display. Among Prius drivers, the display has sparked changes in driving behavior out of a concern for saving gas.

“Once you start making fuel consumption more visible, you have something that comes to the forefront of people’s minds instead of lurking in the background,” said Sarah Darby, a researcher who studies energy feedback technologies at the University of Oxford’s Environmental Change Institute. The monitors “show the consequences of your actions,” she says. “This gives you feedback that alters actions, and encourages you to try and improve things.”

In the Prius and other hybrids with energy displays, drivers can see what specific actions mean for their mileage. In some ways, it is like children learning to color in between the lines, with the teacher standing over their shoulders. Aggressive acceleration after a stoplight — that’s bad. The monitor will show mpg going down. Suddenly slamming the brakes — also bad. Coasting to a stop — good. That tactic lets the engine shut down, saving gas.

Looks like insurance rates could be an added bonus.

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1) Cass Sunstein writes in the Wall Street Journal about new money-saving regulations.

2) Disney creates scarcity with its content.

3) New MPG labels for cars will include information about greenhouse gases.

4) A call for the Indian government to think about behavioral economics.

5) Traffic light interest rates – A heuristic for microfinance loans.

6) The U.K. government wants to make digital delivery a default. Hat tip Amol Agrawal.

7) Choice Architecture in the Wild Pt. 12 by Jonathan McDonald.

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Hyundai’s marketers have already shown that they understand behavioral economics. They are at it again with this commercial, capitalizing on our aversion for ambiguity. The basic idea is that people show a preference for known risks instead of unknown risks. The original experiment illustrating ambiguity aversion is the Ellsberg paradox. A version of this paradox is a situation featuring an urn with 50 red balls and 50 black balls, and another urn that also has 100 balls but where the exact number of each color is unknown. Most people prefer the urn with the known probabilities of pulling a red or a black ball.

So how has Hyundai adapted that idea to sell cars? A used car is worth less than a new car. That’s obvious. But how much less? Most customers have no idea, and finding out would take a lot of work. They are facing an ambiguous urn. Hyundai, however, has a lot of data about their cars. They also have a lot of smart statisticians who can forecast future used car values. Hyundai’s urn is less ambiguous. Although it could try to turn its knowledge of the used car market into a urn with known odds, the company decides to go a step further. It just tells consumers exactly what the outcome will be.

As the commercial says, “Nobody likes what happens to the value of that new car when they drive it off the lot.” With or without the program, the value of a new Hyundai is going to drop by some amount. Customers know that and accept it – even if they don’t like it. So Hyundai can make the present purchase decision easier by eliminating the future uncertainty about the size of that drop. The company has cleverly swapped an unknown risk for an absolute certainty, and made the new car “gamble” more attractive.

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The press release for the Speed Lottery in Sweden is here (in Swedish). What you want to know.

1) The prize is 20,000 kronor. Original idea called for pot based on total amount of fines by speeders. Addendum: 20,000 kronor is about $3,000.

2) The camera started today and runs until September 30th.

3) The camera is set up in a 30 km/hour zone.

4)  Law-abiding cars are registered after the contest is over. One entry per car it looks like.

5) Yes, an official report will be submitted to the government about the results.

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You’re in a car dealership looking to buy a new car. Chances are, you’re going to look at the sticker in the backseat window. You know, the one with the fuel efficiency numbers. But you won’t look for too long. Say 20-30 seconds, tops. Of the following two labels, which one is going to help you figure out the fuel tank’s consequences for the environment and your wallet?

The Environmental Protection Agency hopes you said the first one, which tries to highlight the pocketbook impact better, and adds new details about environmental friendliness. As part of window sticker requirements starting in 2012, the agency is looking to make some changes. The agency is considering swapping the bottom sticker for the top one.

Now consider this sticker, which the EPA is also considering.

The same information that’s on the first label is all there, but of course, there’s now that giant letter grade that’s supposed to sum up fuel and environmental specs for the car in comparison to all other models (cars, trucks, and SUVS) on the market. Reports the NYT:

The highest grade, A+, with fuel economy rated as equivalent to 117 miles per gallon and up, would be for “zero emission” electric cars. Plug-in hybrid electric cars (59 to 116 m.p.g. equivalent) would get an A, and some conventional hybrids, like the Toyota Prius and Ford Fusion, would get an A-. Other hybrids, like the Nissan Altima, Ford Escape and Toyota Camry, would receive a B+.

On the positive side, a school-like grading system is one that everyone is intimately familiar with and, therefore, requires no additional explanation (no grade inflation jokes, please). On the negative side, because grades are so closely tied to education, interpreting them with automobiles is more complicated. In school, everyone wants an A. In a showroom, everyone probably doesn’t want an A. Fuel consumption and environmental friendliness are only two of a host of dimensions buyers will consider. Maybe fuel efficiency is my top priority. Or maybe my top priority is actually a car with lots of towing power, although I’m happy to get the one that sips the least gas. Since the sticker only comes with a grade, and not pictures (or even names would be ok) of other cars with similar grades, I don’t know how heavily to factor it in my decision. Yes, a shopper can go dig up the kinds of details about A+ vs. B+ cars as reported in the New York Times, but the point is if it’s not on the sticker, it’s likely to be ignored.

The EPA hasn’t decided which sticker to have automakers adopt. If you have thoughts, you can let the EPA know here. Hat tip: Colin Manuel.

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Other finalists are here.

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No signal is more perplexing than a car’s check engine light. Is my gas cap loose or is my engine about to die? If your car cries orange a lot, you might be relatively unfazed by the bright light. Oh, is that thing on again?

Based on conversations with friends and some time spent looking through online car forums, it seems that Subaru has linked the check engine light to the cruise control on the popular Outback and Forrester (and possibly other models). When the light illuminates, the cruise control is disabled. In order to regain cruise control, the driver has to take the car to a mechanic who can diagnose any potential engine problems. Why has Subaru settled on this design? To encourage preventative care? To boost the profits of its service centers? Both?

Addendum: In late-model cars, serious engine problems are usually foreshadowed by a blinking check engine light.

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Wharton’s journal of management explains how car maker Hyundai pulled off the remarkable feat of selling more cars in 2008 than it did in 2007. When the economic downturn hit, Hyundai came up with a marketing strategy that a behavioral economist would admire. The promotion that has gotten the most attention (and has been copied by other companies in and out of the auto industry) allows you to return a car if you lose your job. This strategy is particularly appropriate for Hyundai, whose customer base is most affected by the recession. But Hyundai also unveiled another marketing strategy that has gotten less attention.

In another surprising marketing move, the company last month offered to send buyers of some Hyundai models up to $333 a month for six months. The catch: The deal applies only to cars on which Hyundai is offering rebates. Buyers may opt for either the rebate or the monthly check (not both), and the value of the two offers is about equal. But such programs tend to generate consumer buzz.

Amol Agrawal says this offer seems to fly in the face of a classic behavioral economics finding. Behavioral economics has shown that people are impatient. Very impatient. They will take much smaller amounts now (say $10) rather than wait a week for an amazing return on their money ($20). Factoring in interest, Hyundai is offering more money to people who want it all up front. In this uncertain economic environment, Hyundai thinks some patient people will choose the option of a steady cash flow even if it costs a little dough. Why? Well, plenty of lottery winners faced with this very choice opt for the stream of payments. But they are dealing with millions of dollars in winnings. This is much less. Are people tempted to spend the single lump sum payment? People tend to save windfalls of this size, which is why the tax breaks in the recent stimulus bill are being given out in small chunks in order to spur spending. But car rebates don’t come as large checks in the mail two months after you buy a car. They get subtracted from the purchase price at the dealership so they don’t seem like a windfall. It’s too early to know how many car buyers will bite on Hyundai’s offer. If lots do, behavioral economists and marketers might have a new factor to think about in their studies of human decision making.

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Speeding wastes gas, causes accidents, and generally diminishes the driving experience of other drivers. Most nudges to cut down on speeding have come from traffic planners. Now a car maker, Nissan, comes along with a nudge of its own: ECO Pedal. From the Associated Press:

Nissan’s “ECO Pedal” system — promoted as being both green and safe — makes the gas pedal press upward when it senses motorists are speeding up too quickly. Nissan said in a news release Monday the system, which will be available next year, can help drivers improve fuel efficiency 5 to 10 percent.

The system calculates the most efficient rate of acceleration in a vehicle based on how fast fuel is being burned and other factors and causes the gas pedal to push back to alert overzealous drivers. A special meter on the dashboard flashes and changes colors to help drive the message home.

Nissan plans to offer the pedal beginning in 2009. In true libertarian paternalism form, drivers can opt to turn the system off. Nissan’s press release has a graphic on how a drivers acceleration is altered by ECO Pedal.

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Old-fashioned readers of Wednesday’s paper version of the New York Times might have noticed a full page advertisement opposing in-car breathalyzers (in certain situations, anyway), which also go by the name ignition interlocks. The ad, paid for by the American Beverage Institute, is part of an long-running political fight between restaurateurs and drunk driving awareness groups like Mother’s Against Drunk Driving over whether to shove technological nudges into automobiles. Typically, the interlocks work by placing a small alcohol sensor unit on car’s dashboard, which drivers blow into before starting the car. The car cannot be started if the driver’s blood-alcohol-content level is above a certain preset level.

Continue reading the post here.

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