Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 650: The hidden costs of nudging: Experimental evidence from reminders in fundraising
Mette Trier Damgaard and Christina Gravert ()
Additional contact information
Mette Trier Damgaard: Aarhus University
Christina Gravert: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 Gothenburg, Sweden
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, showing that reminders are welfare diminishing for the potential donors as non-givers incur a welfare loss of $2.35 for every reminder. The net benefit of every reminder to the charity is $0.18. Our evaluation shows the need to evaluate nudges on their intended as well as unintended consequences.
Keywords: Avoiding-the-ask; charitable giving; field experiment; inattention; nudge; reminders.
49 pages, March 2016
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