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
selection bias issue
Sakaguchi
- self-selected - selection bias in sample - but used control of similar people that didnt switch - and diff in diff
why is it important for policy makers to consider the broader effects of choice architecture
broader effects may have large effects that outweigh the benefits of the nudge
- could go against the policy objective (credit cards)
