The Hidden Costs of Nudging: Experimental Evidence from Reminders in Fundraising
34 Pages Posted: 15 Mar 2016 Last revised: 31 Oct 2017
Date Written: September 2, 2017
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. 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.
Keywords: Avoiding-the-ask, charitable giving, field experiment, inattention, nudge, reminders
JEL Classification: C93, D03, D64, H41
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