Department of Economics and Business Economics

The hidden costs of nudging: Experimental evidence from reminders in fundraising

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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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages48
Publication statusPublished - 15 Mar 2016
SeriesUniversity of Aarhus, Denmark. Department of Economics. Working Paper
Volume2016-03
ISSN1396-2426

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