Information Nudges and Self-Control
65 Pages Posted: 21 Feb 2019
Date Written: 2018
We study the optimal design of information nudges for present-biased consumers who have to make sequential consumption decisions without exact prior knowledge of their long-term consequences. For arbitrary distributions of risk, there exists a consumer-optimal information nudge that is of cutoff type, recommending consumption or abstinence according to the magnitude of the risk. Under a stronger bias for the present, the target group receiving a credible signal to abstain must be tightened. We compare this nudge with those favored by a health authority or a lobbyist. When some consumers are more strongly present-biased than others, a traffic-light nudge is optimal.
Keywords: information design, information nudges, present-biased preferences, self-control
JEL Classification: C730, D820
Suggested Citation: Suggested Citation