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Everyone believes in redemption: Nudges and overoptimism in costly task completion

Listed author(s):
  • Tasoff, Joshua
  • Letzler, Robert
Registered author(s):

    We elicit subjects’ beliefs about the likelihood that they will redeem a mail-in form. Expected redemption rates exceed actual redemption rates by 49 percentage points, meaning that subjects are overoptimistic about their likelihood of redemption. We test the impact of three “nudges” on overoptimism: (1) informing subjects about a previous cohort's redemption rates, (2) reminding subjects about the redemption deadline, and (3) reducing transaction costs. The first two treatments reduced overoptimism by 7 and 8 percentage points respectively, but these effects were not significant. Only the third nudge had a significant effect and it reduced overoptimism by 26 percentage points. All three nudges increased redemption but had no statistically significant effect on beliefs. Our results suggest that weak cost-salience is an important mechanism for overoptimism.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167268114002303
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 107 (2014)
    Issue (Month): PA ()
    Pages: 107-122

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    Handle: RePEc:eee:jeborg:v:107:y:2014:i:pa:p:107-122
    DOI: 10.1016/j.jebo.2014.08.011
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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