Information Nudges and Self Control

40 Pages Posted: 1 May 2018

See all articles by Thomas Mariotti

Thomas Mariotti

University of Toulouse I

Nikolaus Schweizer

Tilburg School of Economics and Management

Nora Szech

Karlsruhe Institute of Technology

Multiple version iconThere are 3 versions of this paper

Date Written: April 13, 2018

Abstract

A present-biased consumer has to make sequential consumption decisions under no commitment. Consumption is enjoyable in the short term but potentially harmful in the long term. The likelihood of harmful future consequences hinges on the consumer’s type. While the distribution of types is common knowledge, the consumer’s individual type is initially unknown. We study information design in this setting, varying how much a consumer learns about his type via an information nudge. We first consider a mechanism designer who is benevolent in the sense that his interests are aligned with the consumer’s. We find that there always exists an optimal incentive-compatible persuasion mechanism that is of cutoff type, either recommending consumption or abstinence, and we provide a full characterization of this information nudge for an arbitrary distribution of types. Under a stronger bias for the present, the target group of the nudge who receives a credible signal to abstain must be tightened. We compare this information nudge with the optimal information structure if expected consumption should be minimized, and if it should be maximized. The first may be the goal of a health authority, whereas the latter may be preferred by a lobbyist.

Keywords: Information Design, Information Nudge, Present-Biased Preferences, Self Control

JEL Classification: C73, D82

Suggested Citation

Mariotti, Thomas and Schweizer, Nikolaus and Szech, Nora, Information Nudges and Self Control (April 13, 2018). Available at SSRN: https://ssrn.com/abstract=3162013 or http://dx.doi.org/10.2139/ssrn.3162013

Thomas Mariotti

University of Toulouse I ( email )

Toulouse, 31000
France

Nikolaus Schweizer

Tilburg School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

Nora Szech (Contact Author)

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

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