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 for this work

33 Citations (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.

Original language	English
Journal	Journal of Public Economics
Volume	157
Pages (from-to)	15-26
ISSN	0047-2727
DOIs	https://doi.org/10.1016/j.jpubeco.2017.11.005
Publication status	Published - 1 Jan 2018

Keywords

Avoiding-the-ask
Charitable giving
Field experiment
Inattention
Nudge
Reminders

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10.1016/j.jpubeco.2017.11.005

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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.",

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

Abstract

Keywords

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