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Brain Freeze

Why brands should care about our imperfect memory

Small, confused cartoon person standing atop an empty shopping cart.

Quick: List your three favorite fast-food restaurants.

If you’re like many people, McDonald’s, Wendy’s, and Burger King may come to mind—even if you much prefer In-N-Out or Chick-fil-A.

A new Haas study combining decision-making experiments with brain scans found that when it comes to making choices, we frequently and predictably forget about the things we like best and are instead swayed by what we remember—a finding that explains the importance of brands for consumers and has implications for crafting public policy and managing neurodegenerative diseases.

The findings challenge the fundamental tenets of traditional economic models that assume people make rational decisions from all available options. Because most decisions don’t come with multiple-choice answers, we instead conjure options from our imperfect memories.

“Everyone knows that human memory is limited, but scientists know surprisingly little about how this limit impacts our decisions,” says lead author Zhihao Zhang, a Haas postdoctoral scholar, who conducted the research with Assoc. Prof. Ming Hsu and UCSF neurologist Andrew Kayser.

To measure the influence of memory on decisions, the researchers examined people’s choices for different types of branded and nonbranded consumer goods, such as fast food, fruit, and sneakers. In one open-ended study, 30% of people said McDonald’s was their preferred fast food; yet for those given a list of restaurants, only half that many chose the golden arches, while the other half chose restaurants like In-N-Out or Chick-fil-A.

The researchers also scanned the brains of a group of participants using fMRI (functional magnetic resonance imaging). When people were asked to make open-ended choices, the memory retrieval regions of their brains lit up. That didn’t happen when people chose from a list.

All told, the findings show that our memories limit our choices. “What we observed for McDonald’s is true for every product category we investigated and really speaks to the power of brands,” says Hsu.

How imperfect memory causes poor choices

McDonald's and Burger King signs
Photo: Peter Kneffel/picture-alliance/dpa/AP Images

Quick: Pick your three favorite fast-food restaurants.

If you’re like many people, McDonald’s, Wendy’s, and Burger King may come to mind—even if you much prefer In-N-Out or Chick-fil-A.

A new study from UC Berkeley’s Haas School of Business and UC San Francisco’s Department of Neurology found that when it comes to making choices, we surprisingly often forget about the things we like best and are swayed by what we remember. The paper, published this week in the journal Proceedings of the National Academy of Sciences, combines insights from economics and psychology with decision-making experiments and fMRI brain scans to examine how our imperfect memories affect our decision making.

“Life is not a multiple-choice test,” says Berkeley Haas Assoc. Prof. Ming Hsu, director of UC Berkeley’s Neuroeconomics Laboratory, who co-wrote the paper with Dr. Andrew Kayser, associate professor of neurology at UCSF, and lead author Zhihao Zhang, a Haas postdoctoral scholar. “Yet researchers traditionally give people a menu of options and ask them to choose.”

The findings break away from traditional economic models that assume people make rational decisions from all available options. In most situations, rather than choosing from a ready-made list, we conjure choices from our memory.

“While everyone knows that human memory is limited—and there’s a thriving market for reminder apps and Post-it Notes—scientists know surprisingly little about how this limit impacts our decisions,” says Zhang. Answering this question could hold implications for everything from conducting consumer research and crafting public policy to managing neurodegenerative diseases.

Forgetting favorites

To measure the influence of memory on decisions, the researchers examined people’s choices for different types of consumer goods, such as fast food, fruit, sneakers, and salad dressing. For each, they asked one group of participants to name as many favorite brands or items in the category as they could. They asked a second group to choose their preferences from a menu of options. Based on those results, they created a mathematical method to predict which items people would choose in an open-ended situation.

The most surprising takeaway was just how often people seemed to forget to mention items they liked best, choosing less-preferred, but more easily remembered items. “A lot of people name McDonald’s as their favorite, but many of those people don’t actually like McDonald’s as much as other brands,” says Kayser. In an open-ended situation, 30% of people said McDonald’s is their preferred fast food; yet for those given a list of restaurants, only half that many (15%) chose the Golden Arches, with the other half instead choosing restaurants such as In-N-Out or Chick-fil-A.

The researchers found similarly large differences between people’s preferences in open ended versus list-based choices in all the other types of consumer goods tested, both branded and nonbranded, such as fruit. “The magnitude of these changes was very surprising,” says Hsu. “The fact that so many people don’t mention their favorites really argues against the notion that we usually act in our own best interest, as standard economic models might have us believe.”

Surprisingly accurate predictions

To gain a deeper scientific understanding of how memory impacts decisions, the researchers next constructed a new mathematical model that combines economic models of decision-making with psychological models of memory recall. “Very little attention has been paid to connecting these two areas,” says Zhang. “By taking the best features of each, we found that we could make amazingly accurate predictions of how often people fail to choose their more preferred options due to their imperfect memories.”

In fact, the predictions were so accurate that the researchers thought they had made a mistake. “We only came to trust the findings after checking and repeating the experiments multiple times,” he said.

Brain scans show memory systems working

Understanding the role memory plays in decision making has implications for millions of people managing neurodegenerative diseases such as Alzheimer’s disease, says Kayser, who researches behavioral neurology.

“We know that memory declines as Alzheimer’s disease progresses. We also see that decision-making capacity diminishes in areas such as financial management. But we don’t yet have good models of how they might be linked, or even good ways to measure changes in decision-making capacity,” he says. “For neurologists, these are urgent questions.”

To nail down the role of memory retrieval in decision making, the researchers scanned the brains of a group of participants using fMRI (functional magnetic resonance imaging). Past neuroscientific research has shown that decision-making—which involves valuation—and memory are served by different brain systems.

“When people made open-ended choices in our experiments, we saw increased activity in memory retrieval regions of the brain and enhanced communication with valuation regions,” says Zhang. That didn’t happen when participants simply picked choices from a list: The valuation part lit up, but memory systems showed much less activity.

This provides neural evidence for the direct involvement of memory systems in open-ended decisions, and sheds light on the nature of suboptimal decisions in these situations.

“Based on these findings, it’s possible that Alzheimer’s patients are particularly vulnerable when decisions are open-ended,” says Kayser, “If so, this could motivate development of decision support systems that can alleviate these vulnerabilities.”

The research could also provide a more targeted way of designing “nudges” that help people expand their options without mandating specific choices. For example, “If we want consumers to switch to more sustainable species of fish, it might help to find a way to get people to consider other types of seafood they may have overlooked otherwise,” says Hsu.

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Retrieval-Constrained Valuation: Toward Prediction of Open-Ended Decisions
By Zhihao Zhang, Shichun Wang, Maxwell Good, Siyana Hristova, Andrew Kayser & Ming Hsu
Proceedings of the National Academy of Sciences (PNAS), May 18, 2021

Media contact
Laura Counts
lcounts@haas.berkeley.edu
(510) 643-9977

Berkeley Haas hosts 2021 Clorox Case Competition

Haas MBA students participated in the 2021 Clorox Case Competition. From left to right, top to bottom: Brandon Elhert, Emily Orr, Shaan Arora, Almas Sharif, and Sachi Holla, all MBA 22.

Twelve MBA student teams convened online last week to pitch marketing plans to sell smart Brita water filter products to a specific group of The Clorox Company consumers in the 2021 Clorox Case Competition.

The competition, hosted by the Berkeley Haas Marketing Club, was held virtually April 15-16. Wharton took first place, Berkeley Haas took second, and Cornell placed third.

The Berkeley Haas team included Brandon Ehlert, Emily Orr, Sachi Holla, Almas Sharif, and Shaan Arora, all MBA 22.

The competition grew out of a long-standing relationship between Berkeley Haas and The Clorox Company.

Mathilde De La Calle and Vaibhav Anand, both MBA 22, organized the competition. “We’re giving students the chance to really get to know The Clorox Company, its brand, and get access to information that you don’t get unless you work at the company,” Anand said.

Emily Orr, MBA 22, who’s pursuing brand management at Haas, said the competition pushed her to approach this challenge from both a marketing and consulting perspective. Her team pitched Brita+, water bottles that utilizes smart technology centered around hydration and sustainability.

Of the dozen teams that competed in round one, five teams moved on to the final round Friday for the chance to win $5,000 in prize money and interviews for full-time positions at Clorox. Second and third place winners received $3,000 and $1,000 respectively.

Emily Powell, BCEMBA 08
President & Owner, Powell’s Books

Emily Powell, BCEMBA 08

As the president of world-famous Powell’s Books in Portland, Ore., Emily Powell is well-versed in the nuances of globalization. “We don’t have aims to be in any other city, yet we’re very successful,” she says. “Going deep and knowing your community can allow you to be even more successful than a business with aspirations to go wide.”

Powell’s grandfather started the business as a used bookstore in 1971, and over the years, the store has grown to offer new books, encompass a city block, and, in 1994—pre-Amazon.com—sell books online.

While bookselling is still about connecting readers and books, Powell has had to confront contemporary challenges: the ascent of Amazon, e-books, and, most recently, a pandemic. Through it all, Powell has made serving Oregon’s readers and writers her top priority while also deftly delivering books to readers nationwide and beyond.

The secret sauce, Powell says, lies in used books: intricately tracking their performance—how quickly they sold, at what price, and in what condition—to aid future merchandise choices and shelving them with new books, which many bookstores don’t do. “By far we sell more of both new and used as a result,” she says.

Equally important is maintaining a presence for Powell’s pilgrims. She remembers one Florida woman who burst into tears upon entering the store and realizing a life dream. “Our loyal customers outside of Portland have all had some physical contact with the store,” she says. “They’ve all either been there or had someone tell them about it. It’s the weight of a physical experience that’s allowed us to become who we are.”