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

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  • Christina Gravert
  • Mette Trier Damgaard

Abstract

We document the hidden costs of one of the most policy-relevant nudges, reminders. Sending reminders, while proven effective in facilitating behavior change, may come at a cost for both senders and receivers. Using a large scale field experiment with a charity, we find that reminders increase donations, but they also substantially increase unsubscriptions from the mailing list. To understand this novel finding, we develop a dynamic model of donation and unsubscription behavior with limited attention which is tested in reduced-form using a second field experiment. We also estimate our model structurally to perform a welfare analysis. We show that when not accounting for the hidden costs of reminders the average welfare effects for donors are overstated by a factor of ten and depending on the discount factor the welfare effects of the charity may be negative. Our results show the need to evaluate nudges on their intended as well as unintended consequences.

Suggested Citation

  • Christina Gravert & Mette Trier Damgaard, 2016. "The hidden costs of nudging: Experimental evidence from reminders in fundraising," Natural Field Experiments 00549, The Field Experiments Website.
  • Handle: RePEc:feb:natura:00549
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    Cited by:

    1. Adena, Maja & Huck, Steffen, 2016. "Online fundraising, self-image, and the long-term impact of ask avoidance," Annual Conference 2016 (Augsburg): Demographic Change 145535, Verein für Socialpolitik / German Economic Association.
    2. Adena, Maja & Huck, Steffen, 2019. "Giving once, giving twice: A two-period field experiment on intertemporal crowding in charitable giving," Journal of Public Economics, Elsevier, vol. 172(C), pages 127-134.
    3. Gary Bolton & Eugen Dimant & Ulrich Schmidt, 2018. "When a Nudge Backfires. Using Observation with Social and Economic Incentives to Promote Pro-Social Behavior," PPE Working Papers 0017, Philosophy, Politics and Economics, University of Pennsylvania.
    4. Maria De Paola & Francesca Gioia & Fabio Piluso, 2017. "Does Reminding Of Behavioural Biases Increase Returns From Financial Trading? A Field Experiment," Working Papers 201705, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    5. Casarico, Alessandra & Tonin, Mirco, 2018. "Pay-What-You-Want to Support Independent Information: A Field Experiment on Motivation," IZA Discussion Papers 11366, Institute of Labor Economics (IZA).
    6. Cristina Bicchieri & Eugen Dimant, 2019. "Nudging with Care: The Risks and Benefits of Social Information," Discussion Papers 2019-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    7. Damgaard, Mette Trier & Gravert, Christina, 2017. "Now or never! The effect of deadlines on charitable giving: Evidence from two natural field experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 78-87.
    8. repec:eee:ecoedu:v:64:y:2018:i:c:p:313-342 is not listed on IDEAS
    9. Murooka, Takeshi & Schwarz, Marco A., 2018. "The timing of choice-enhancing policies," Journal of Public Economics, Elsevier, vol. 157(C), pages 27-40.
    10. Damgaard, Mette Trier & Nielsen, Helena Skyt, 2018. "Nudging in education," Economics of Education Review, Elsevier, vol. 64(C), pages 313-342.
    11. Castleman, Benjamin L. & Murphy, Francis X. & Patterson, Richard & Skimmyhorn, William L., 2019. "Active Choice Framing and Intergenerational Education Benefits: Evidence from the Field," IZA Discussion Papers 12523, Institute of Labor Economics (IZA).
    12. Taylor, Rebecca, 2018. "A Mixed Bag: The Hidden Time Costs of Regulating Consumer Behavior," 2018 Annual Meeting, August 5-7, Washington, D.C. 274129, Agricultural and Applied Economics Association.
    13. Altmann, Steffen & Grunewald, Andreas & Radbruch, Jonas, 2019. "Passive Choices and Cognitive Spillovers," IZA Discussion Papers 12337, Institute of Labor Economics (IZA).
    14. Kesternich, Martin & Römer, Daniel & Flues, Florens, 2019. "The power of active choice: Field experimental evidence on repeated contribution decisions to a carbon offsetting program," European Economic Review, Elsevier, vol. 114(C), pages 76-91.
    15. Adena, Maja & Huck, Steffen, 2016. "Online fundraising, self-deception, and the long-term impact of ask avoidance," Discussion Papers, Research Unit: Economics of Change SP II 2016-306, WZB Berlin Social Science Center.
    16. Andor, Mark A. & Fels, Katja M. & Renz, Jan & Rzepka, Sylvi, 2018. "Do planning prompts increase educational success? Evidence from randomized controlled trials in MOOCs," Ruhr Economic Papers 790, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    17. Muller, Paul & Habla, Wolfgang, 2018. "Experimental and non-experimental evidence on limited attention and present bias at the gym," Working Papers in Economics 743, University of Gothenburg, Department of Economics.
    18. repec:eee:ecolet:v:171:y:2018:i:c:p:133-136 is not listed on IDEAS
    19. repec:eee:joepsy:v:66:y:2018:i:c:p:45-63 is not listed on IDEAS
    20. Adena, Maja & Huck, Steffen, 2017. "Narrow framing in charitable giving: Results from a two-period field experiment," Discussion Papers, Research Unit: Economics of Change SP II 2017-305, WZB Berlin Social Science Center.
    21. Arno Apffelstaedt & Jana Freundt, 2018. "Corrupted Votes and Rule Compliance," PPE Working Papers 0018, Philosophy, Politics and Economics, University of Pennsylvania.
    22. repec:eee:ecolec:v:148:y:2018:i:c:p:178-210 is not listed on IDEAS
    23. Robert Dur & Dimitry Fleming & Marten van Garderen & Max van Lent, 2019. "A Social Norm Nudge to Save More: A Field Experiment at a Retail Bank," Tinbergen Institute Discussion Papers 19-063/I, Tinbergen Institute.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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