How Nudges Create Habits: Theory and Evidence from a Field Experiment

75 Pages Posted: 20 Dec 2021 Last revised: 25 Mar 2024

See all articles by David P. Byrne

David P. Byrne

University of Melbourne

Lorenz Goette

University of Bonn

Leslie A. Martin

University of Melbourne - Department of Economics

Amy Miles

affiliation not provided to SSRN

Alana Jones

affiliation not provided to SSRN

Samuel Schob

University of Bamberg

Thorsten Staake

University of Bamberg

Verena Tiefenbeck

ETH Zürich

Date Written: February 29, 2024

Abstract

We run a field experiment that monitors behavioral responses to nudges at a high frequency during and post-treatment and varies the duration of treatment cycles. We document asymmetry: treatment effects emerge immediately with nudges, neither grow nor wane with continued treatment, and gradually decay after nudges stop, taking longer to decay the longer the duration of treatment. To study the underlying behavioral mechanism for these dynamics, we extend the traditional consumption-based model of habit formation to incorporate salience and the possibility of state-dependent attention. We structurally estimate the model and find that a dynamic attention-based mechanism best predicts consumption responses to nudges in our context, both in and out of sample. Through counterfactual simulations, we illustrate the importance of identifying the underlying behavioral mechanism by contrasting implications of consumption- and attention-based habit formation when designing nudge interventions for sustained behavioral change.

Keywords: Habit formation; Salience nudges; Attention; Randomized Control Trial; Structural Estimation; Water Consumption

JEL Classification: C52, C93, D83, D91, L95, Q25

Suggested Citation

Byrne, David P. and Goette, Lorenz and Martin, Leslie A. and Miles, Amy and Jones, Alana and Schob, Samuel and Staake, Thorsten and Tiefenbeck, Verena, How Nudges Create Habits: Theory and Evidence from a Field Experiment (February 29, 2024). Available at SSRN: https://ssrn.com/abstract=3974371 or http://dx.doi.org/10.2139/ssrn.3974371

David P. Byrne (Contact Author)

University of Melbourne ( email )

Level 4
111 Barry Street
Melbourne, Victoria 3010
Australia

HOME PAGE: http://sites.google.com/view/dprbyrne/

Lorenz Goette

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Leslie A. Martin

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://lesliemartin.org

Amy Miles

affiliation not provided to SSRN

Alana Jones

affiliation not provided to SSRN

Samuel Schob

University of Bamberg ( email )

Thorsten Staake

University of Bamberg ( email )

Kirschaeckerstrasse 39
Bamberg, 96045
Germany

Verena Tiefenbeck

ETH Zürich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

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