27 - Nudge examples Flashcards
what is the ‘default’ example
nudges
having different defaults - could induce different behaviours because of status quo bias
driven by
- endowment effect
- inattention
- interpretting them as recommendations
- different default = different choice architecture
Johnson and Goldstein (2003)
example of default
cross country study
organ donation
- Cross country European study
- comparing cases where organ donation requires donors consent to opt in ad opt out
- percentage of people consenting to organ donations low in countries with opt in, but high in countries with opt-out
- but this may reflect differences in country policies
Johnson and Goldstein (2003)
example of default
online study
- subjects asked if would consent to organ donation if moved to new state
- 3 treatments: opt in, opt out, neutral (choose yourself)
- feasible set is always {in,out}
Johnson and Goldstein (2003)
online results
- high consent rates in opt out and neutral treatments
- lower rates in opt in
- implies default has causal impact on consent
in what cases are nudges effective
TS
- cost now benefit later
- do nothing easy option
- unfamiliar options
- captured by personal finance = pensions
Madrian & Shia
natural experiment
- company pension scheme enrolment
- looks at enrolment before and after it changed its enrolment rules
- diff in diff
Madrian and Shea
what is the difference between old and new
old
- eligible after 1 year
- default = opt in
- choose own contribution level between 1-15
- investment options to choose from with no default
- employer matches 50% of contribution up to 6% of salary
Madrian and Shea
what is the difference between old and new
new
- eligible from hire
- enrolled on hire = default
- default contribution 3%
- default investment option
- all defaults can be changed
Madrian results
comapring before and after employed
employed before change
- widely dispersed contribution levels
- spike at 6
- similar pension asset allocation - different categories chosen
newly employed
- very big spike at new default - 3%
- high participation
- most invest in the default option
Madrian and Shea
conclusions
- changing to defaults changed behaviour a lot
- increased participation = good increase LR savings
- but unfortunately nudged people to invest less than already
- inappropriate asset allocation?
what would TS say about Madrian results
lower contribution
- nudges should encourage behaviour in LR interests
- should promote high contribution
- but if too high would maybe discourage people from participating
aim of
Sakaguchi et al (2022)
- effects of credit card minimum payment levels
- how does automation of credit card payments effect behaviour
what are the pros of automated credit card repayment
- wont forget to pay
- can create default for self
Sakaguchi
field study
- focus on cards that were switched by their holder to automated payments
results of Sakaguchi
from switch
after
* less missed payments
* similar full payments
* much higher proportion of minimum repayments than before
- statistically significant negative effect of switching to automation on monthly payments - longer time to pay balance - not LR best interests
