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Opinions on Practice Management

Practical Implications of Behavioral Economics for Dermatology Practice: Part 2

Scott Davis, Steven R. Feldman, MD, PhD

Wednesday, November 20, 2013

In this article, we continue our discussion of insights into the implications of behavioral economics for dermatology practice. Counterintuitive conclusions arise with the observation that humans violate the assumptions of rational choice theory. These 'irrational' choices have important implications for dermatology practice.


Bias Definition
Default option People favor an option presented as a default choice, rather than weighing it equally against other options
Negativity bias The tendency to recall negative events more easily that positive events
The Easterlin Paradox Beyond a certain level, rising income is not associated with rising happiness
Hedonic treadmill People's happiness quickly adjusts to changes in circumstances
Mental accounting Money is placed in separate 'mental accounts' with different marginal propensities to consume


Default options have extremely powerful effects on human choice behavior. In their book Nudge, Richard Thaler and Cass Sunstein describe a variety of ways in which socially desirable outcomes have been encouraged simply by making a particular choice the default.2 Consider retirement planning; too few employees sign up to make contributions to their companies' retirement plans. One way to address this problem is to offer employees more retirement plan choices and options on how to invest their retirement contributions; however, this approach actually reduces the rate of employee participation in retirement schemes. Companies that automatically enroll their new employees in the 401(k) retirement plan obtain much higher enrollment rates than those that require employees to 'opt in' to participate. People tend to go with the default options; the more complicated the decision, the more likely they are to just stick with the default.

Similar effects are seen in organ donation programs. Countries that use an 'opt-out' system have much higher organ donation rates than those that use an 'opt-in' system.2 In a similar way, by using the default option phenomenon to present what they believe is the best treatment choice as a default, physicians are likely to influence patients to choose that option. For instance, a dermatologist can say to a psoriasis patient, 'For patients like you, the usual choice is Enbrel.' If the physician goes on to describe a long list of alternative, more complicated options, patients might be even more likely to accept the default option. Presenting a long list of options tends to overwhelm the patient; too many choices increases the probability of choosing the default option. When Medicare Part D was started in Maine, 46 options were offered, and many patients were so overwhelmed by the decision that they did not sign up.2 Maine developed a system to automatically switch patients into the option that would provide the best coverage, leading to much better outcomes.

Negativity bias is the tendency to place much more weight on observed negative events than on statistically more common positive events. One negative story about a brand or product can outweigh much larger numbers of positive incidents. For example, a single negative story about a Tesla Model S battery catching on fire drove Tesla's stock price down by 10% in 2 days, whereas the stock price rose by only 2% when Tesla received a 5-star crash test rating based on much more data.3 Even when most reviews are positive, stakeholders become extremely concerned about one or two very negative reviews on websites such as (physician offices), Amazon (books), or Yelp (restaurants). Although patients generally rate their doctors very highly, with an average rating of 9.3 out of 10,4 it takes large numbers of positive ratings to undo the psychological effect of one very negative rating.

Negativity bias is a problem for patients' perceptions of medications. If a patient has heard one horror story about a medication from a friend or relative, the patient may be very unwilling to try the medication despite statistics showing the likelihood of benefit from the treatment. If the physician is aware that the patient has a strong bias against a particular medication, the physician can compensate by recommending a different medication. Even if the alternative medication is very similar, the physician may be able to create a positive impression of that medication by emphasizing its differences from the disfavored medication.

The Easterlin Paradox is the finding that, beyond a certain modest income level, additional income is not associated with increased happiness.5 In addition, people tend to misjudge the level of spending that will actually increase their happiness. In Happy Money, Elizabeth Dunn and Michael Norton argue that people could get more happiness out of their spending by investing in connections with others rather than spending money on oneself, and by buying more experiences rather than things.6 Patients who join support groups such as the National Psoriasis Foundation (NPF) not only become more knowledgeable than other patients,7 but also have a highly beneficial support network of fellow patients. By working together to raise money and demand political support for psoriasis-related causes, NPF members develop strong bonds and enhance their happiness. Doing good deeds together for the entire psoriasis community raises happiness much more than self-interested activities done alone.

To exploit the happiness benefits of positive outcomes, perhaps medical treatment should be presented to patients as an experience. This is already a common practice in cosmetic dermatology, and should be emulated in clinical dermatology. Presenting the expected improvement in psoriasis symptoms by stressing the activities and experiences that could result from skin clearing, rather than just changes in the lesions, is likely to give patients a better sense of the potential benefits of treatment.

On a similar note, the hedonic treadmill concept suggests that a person's happiness easily adjusts to new circumstances, whether circumstances improve or decline. People compare themselves to a reference group of similar peers, and may not feel any more successful or enduringly happy when they move up, since they then adopt more successful people as their reference group. Thus, when patients have an initial improvement in their disease, they may feel great about it. However, after some time they may lose satisfaction with that degree of improvement and may begin to feel their treatment is 'no longer working'.

Mental accounting is another cognitive bias in which people mentally place money in separate accounts. People are more likely to travel across town to get a pen for $5 instead of $15 than to get a suit for $490 instead of $500.8 Objectively, whether it is worth traveling across town to save $10 is not related to the total price of the item, but psychologically, the benefit of saving $10 seems much greater when it is a greater fraction of the total price. Amazingly, Thaler found that even when the buyer was purchasing both items simultaneously and paying the exact same total amount regardless of which was the discounted item, there was still a major difference in willingness to travel.8, 9 Separate mental accounts may explain why some patients do not mind paying $10 for an over-the-counter medication, but may balk at paying $10 for a better prescription treatment because they think it should be fully covered by insurance. If patients are missing their phototherapy appointments, it may be helpful to determine whether they have a mentally separate 'gas money' account that gets depleted when gasoline prices rise.10 If so, a home light unit is probably better.

The cognitive biases that underlie 'irrational' choices are ubiquitous. With a sound knowledge of these biases, we can help address the issues of human behavior that play a large role in patients' satisfaction and treatment outcomes.


1.  List of cognitive biases. Accessed October 17, 2013.

2.  Thaler RH, Sunstein CR. Nudge: Improving Decisions About Health, Wealth, and Happiness, Revised and Expanded Edition. New York: Penguin; 2009.

3.  Ariely D. Ask Ariely: On Tesla, To-Do Lists, and Knowing the News. Accessed October 15, 2013.

4.  Feldman SR. If 90 percent of patients are happy, why do doctors need patient feedback? Accessed October 16, 2013.

5.  Easterlin RA. Does Economic Growth Improve the Human Lot? Some Empirical Evidence. In: David PA, Reder MW, editors. Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. New York: Academic Press; 1974.

6.  Dunn E, Norton M. Happy Money: The Science of Smarter Spending. New York: Simon & Schuster; 2013.

7.  Nijsten T, et al. Members of the national psoriasis foundation: more extensive disease and better informed about treatment options. Arch Dermatol 2005;141:19-26.

8.  Kahneman D, Tversky A. Choices, Values, and Frames. Am Psychologist 1984;39:341-50.

9.  Thaler RH. Toward a positive theory of consumer choice. J Econ Behav Org 1980;1:39-60.

10. Yentzer BA, et al. Explicit and implicit copayments for phototherapy: examining the cost of commuting. Dermatol Online J 2013;19:18563.