The Target Opportunity Costs of Successful Nudges

CONSUMER LAW AND ECONOMICS 3 (KLAUS MATHIS & AVISHALOM TOR EDS., 2021), Springer: Nature.

18 Pages Posted: 19 Apr 2022 Last revised: 26 Apr 2022

Date Written: 2021

Abstract

Nudges are increasingly popular, in large part due to the typically low costs required to implement them. Yet most often the main cost of nudging is not its implementation cost but rather the opportunity costs of its successful change of the behavior of its targets. Accounting for these target opportunity costs is essential for the appropriate assessment of the welfare effects of nudges. Nonetheless, the extant literature on behavioral policies largely ignores these costs or underestimates their magnitude and, consequently, overestimates the net benefits of nudges. At times, nudges remain the most attractive policy alternative even after their opportunity costs are accounted for. On other occasions, however, traditional instruments or a no-intervention approach turn out to make more efficient polic alternatives.

Keywords: Behaviral Law and Economics, Behavioral Regulation, Regulation, Rationality, Cost-Benefit Analysis

Suggested Citation

Tor, Avishalom, The Target Opportunity Costs of Successful Nudges (2021). CONSUMER LAW AND ECONOMICS 3 (KLAUS MATHIS & AVISHALOM TOR EDS., 2021), Springer: Nature., Available at SSRN: https://ssrn.com/abstract=4083684 or http://dx.doi.org/10.2139/ssrn.4083684

Avishalom Tor (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States

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