The hidden costs of nudging: Experimental evidence from reminders in fundraising

Mette Trier Damgaard; Christina Gravert

doi:10.1016/j.jpubeco.2017.11.005

The hidden costs of nudging: Experimental evidence from reminders in fundraising

Mette Trier Damgaard, Christina Gravert^*

^*Corresponding author af dette arbejde

33 Citationer (Scopus)

Abstract

We document the hidden costs of a popular nudge and show how these costs distort policy making when neglected. In a field experiment with a charity, we find reminders increasing intended behavior (donations), but also increasing avoidance behavior (unsubscriptions from the mailing list). We develop a dynamic model of donation and unsubscription behavior with limited attention. We test the model in a second field experiment which also provides evidence that the hidden costs are anticipated. The model is estimated structurally to perform a welfare analysis. Not accounting for hidden costs overstates the welfare effects for donors by factor ten and hides potential negative welfare effects of the charity.

Originalsprog	Engelsk
Tidsskrift	Journal of Public Economics
Vol/bind	157
Sider (fra-til)	15-26
ISSN	0047-2727
DOI	https://doi.org/10.1016/j.jpubeco.2017.11.005
Status	Udgivet - 1 jan. 2018

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10.1016/j.jpubeco.2017.11.005

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N2 - We document the hidden costs of a popular nudge and show how these costs distort policy making when neglected. In a field experiment with a charity, we find reminders increasing intended behavior (donations), but also increasing avoidance behavior (unsubscriptions from the mailing list). We develop a dynamic model of donation and unsubscription behavior with limited attention. We test the model in a second field experiment which also provides evidence that the hidden costs are anticipated. The model is estimated structurally to perform a welfare analysis. Not accounting for hidden costs overstates the welfare effects for donors by factor ten and hides potential negative welfare effects of the charity.

AB - We document the hidden costs of a popular nudge and show how these costs distort policy making when neglected. In a field experiment with a charity, we find reminders increasing intended behavior (donations), but also increasing avoidance behavior (unsubscriptions from the mailing list). We develop a dynamic model of donation and unsubscription behavior with limited attention. We test the model in a second field experiment which also provides evidence that the hidden costs are anticipated. The model is estimated structurally to perform a welfare analysis. Not accounting for hidden costs overstates the welfare effects for donors by factor ten and hides potential negative welfare effects of the charity.

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KW - Reminders

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JO - Journal of Public Economics

JF - Journal of Public Economics

ER -

The hidden costs of nudging: Experimental evidence from reminders in fundraising

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