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Week7-Lecture1.qmd
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Week7-Lecture1.qmd
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---
date: "`r (lubridate::ymd('20241002')+lubridate::dweeks(6))`"
title: "Class 13 Case Study: Improve User Engagement for Instagram Using A/B/N Testing"
---
# Case Background
## Business Objective
- Instagram aims to increase user engagement and activity.
- We can propose gamification strategies based on scientific theories.
- Need to empirically test whether proposed gamification strategies are effective using A/B/N testings.
## Situation Analysis
Conduct a situation analysis to assess Instagram’s business environment in the UK:^[Suggested answers are on the course website.]
- What is Instagram's business model?
- How does Instagram make revenues?
- Who are Instagram's customers?
- What are the major competitors and their relative strengths and weaknesses compared with Instagram?
- Who are the collaborators of Instagram?
- PESTLE analysis: any particular legal and regulatory issues that Instagram needs to be aware of?
# Theoretical Motivations
## Theoretical Motivation for Business Ideas
- When proposing business ideas, we should base our proposals on scientific, well-established theories from different disciplines.
- **Bottom-up approach**: start with theories and then generate business ideas
- **Top-down approach**: start with business ideas and then find theories to support them
- Let's first see some examples of behavioral economics theories!
## Behavioral Theories
- [Framing effect](https://www.investopedia.com/framing-effect-7371439)
- [Endowment effect](https://www.investopedia.com/terms/e/endowment-effect.asp)
- [Mental accounting](https://www.investopedia.com/terms/m/mentalaccounting.asp)
## Default Effect
- [Default effect](https://en.wikipedia.org/wiki/Default_effect)
::: {.columns}
::: {.column width='50%'}
```{r}
#| echo: false
#| fig-align: 'center'
knitr::include_graphics("images/Week 7/organ donation.png")
```
:::
::: {.column width='50%'}
```{r}
#| echo: false
#| fig-align: 'center'
knitr::include_graphics("images/Week 7/default effect.png")
```
:::
:::
## Left-Digit Bias
- [Left-digit bias](https://journals.sagepub.com/doi/full/10.1177/0022243720932532)
::: {.columns}
::: {.column width='50%'}
```{r}
#| echo: false
#| fig-align: 'center'
knitr::include_graphics("images/Week 7/iPhone pricing.png")
```
:::
::: {.column width='50%'}
```{r}
#| echo: false
#| fig-align: 'center'
knitr::include_graphics("images/Week 7/left digit bias.jpg")
```
:::
:::
## Social Comparison Theory
- People evaluate their own opinions and abilities by comparing themselves to others, especially when comparing oneself to similar others.
- Social comparison can be upward or downward.
- Social comparison can motivate people to improve their performance; however, it can also lead to negative emotions.
```{r}
#| echo: false
#| fig-align: 'center'
knitr::include_graphics("images/Week 7/Social Comparison Theory.jpeg")
```
## Prospect Theory
- Prospect theory posits that people feel more pain from losing something than pleasure from gaining something.
- This theory can be used to explain why people are more likely to engage in activities that prevent loss than those that promote gain.
```{r}
#| echo: false
#| fig-align: 'center'
knitr::include_graphics("images/Week 7/Prospect Theory 2.png")
```
## Business Proposal
- Implement gamification features on Instagram to increase user activity based on the theories of Social Comparison and Prospect Theory.
- Let's think about ideas that can boost user engagement on Instagram.
## Potential Strategies
- **Endowment effect**: Implementing a points and badge system to create sense of ownership and encourage engagement (e.g., likes, comments, shares).
- **Social comparison theory**: Leaderboards showing top users; Social comparison through activity rankings
- **Prospect theory**: Time-limited rewards and achievements
# A/B/N Testing for Instagram
## Step 1: Decide on the Unit of Randomization
- What would be the best unit of randomization?
## Step 2: Mitigate Spillover and Crossover Effects
- What are the potential problems for spillover and crossover?
## Step 3: Decide on Randomization Allocation Scheme
- How should we determine the randomization scheme?
## Step 4: Collect Data
- What is the sample size we need?
- What data should we collect?
## Step 5: Data analytics
- Randomization checks
- How to estimate the treatment effects?
## After-Class
- (optional) [Test and learn: How a culture of experimentation can help grow your business](https://www.thinkwithgoogle.com/intl/en-gb/marketing-strategies/data-and-measurement/test-learn-experiment-culture/)