The Hidden Costs of Nudging: Experimental Evidence from Reminders in Fundraising

34 Pages Posted: 15 Mar 2016 Last revised: 31 Oct 2017

Mette Damgaard

University of Aarhus - Department of Economics and Business

Christina Gravert

Göteborg University

Date Written: September 2, 2017

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. 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

Suggested Citation

Damgaard, Mette and Gravert, Christina, The Hidden Costs of Nudging: Experimental Evidence from Reminders in Fundraising (September 2, 2017). Available at SSRN: https://ssrn.com/abstract=2747893 or http://dx.doi.org/10.2139/ssrn.2747893

Mette Damgaard (Contact Author)

University of Aarhus - Department of Economics and Business ( email )

Fuglesangs Alle 4
Aarhus, 8210
Denmark

Christina Gravert

Göteborg University ( email )

Viktoriagatan 30
Goeteborg, 405 30
Sweden

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