Nobody wants to fail, and being in last place is the worst of failures. New research reveals, however, that the aversion to last place is a powerful driving factor in many decisions, which might offer unexpected opportunities for business.
Professors Ilyana Kuziemko of Columbia Business School and Ryan Buell and Michael Norton of Harvard Business School, working with doctoral candidate Taly Reich of the Stanford Graduate School of Business, collaborated on a series of experiments to explore how far people would go to avoid being in last place. One experiment was designed to measure how much risk those at the bottom of a ranking would be willing to take. The participants were assigned a level of wealth and could move up in two ways: gambling, which enabled quick moves (up, but also down), or accepting a small but guaranteed sum. Those at the very bottom were consistently more willing to gamble than those even one ranking up from the bottom.
Variations of the gambling game showed the impact of what the researchers call “Last Place Aversion” to those in second-to-last place. For example, if last place participants might have a chance to move up, the participants in second-to-last place were more likely to take risks to move up themselves, thereby avoiding falling to the bottom of the rankings.
Also revealing was an experiment in which participants were again given a ranking of wealth. They were then told they could give money to a person one step above them (i.e. one step richer than them) or one step below them. Most participants gave their money to a person one step poorer than them… until it came to the participants who found themselves on the next-to-last rung of the wealth ladder. In this case, the majority gave their money to the richer people – because helping the participants below them would enable those participants to leapfrog over them in the rankings.
The researchers applied the Last Place Aversion concept to the domain of social policy, specifically through surveys of low-income attitudes toward minimum wage increases. Workers with jobs paying just above the minimum wage were the least likely of all income levels to support raising the minimum. They did not want the workers “below” them to move up; such a move would essentially cause the above-minimum wage workers to lose their position above at least one income level.
Although the business implications of Last Place Aversion need to be studied further, the new research implies some psychological reasoning behind decisions taken by consumers. For example, research has shown that consumers tend to choose the second least expensive wine on the menu; one could assume that they prefer to avoid the “last-place” wine, which would highlight that they are buying cheap wine.
Last Place Aversion can also influence how consumers react to standing in line. One study showed that the more people behind a person in line, the more likely that person will stay in line. Taking account of Last Place Aversion, businesses might be able to increase sales simply by engaging with the consumers at the very end of long lines - at least until those at the end of the line are no longer in “last place.”
The driving desire to stay out of last place could also be used to motivate employees, through making rank a function of task completion, for example. Questions, however, remain to be answered. Would an employee in last place work harder to try to move up… or just give up?
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