A practitioner’s guide to nudging

Ly, Kim, Nina Mazar, Min Zhao, and Dilip Soman (2013) A practitioner’s guide to nudging. Rotman School of Management.

While a significant change in economic outcome or incentives is not a nudge, a nudge may serve to highlight an economic incentive.

An organizing framework

Share characteristics that can be classified across four different dimensions:

Boosting self-control vs. Activating a desired behaviour

Boosting: The is a discrepancy between what people would like and what they end up doing.

Activating: Individual might not always actively consider the bahaviour. Influence an indifferent or inattentive individual.

Externally-imposed vs. Self-imposed

Self-imposed: voluntarily adopted

Externally: passively shape behaviour, without prompting by the nudgee

Mindful vs. Mindless

Mindful: guide individuals to a more controlled state. Help people make better intertemporal choices so current behaviour better reflects future wishes.

Mindless: include the use of emotion, framing, or anchoring to sway the decisions

Encourage vs. Discourage

Encourage: facilitate a desired behaviour.

Discourage: hinder or prevent a targeted behaviour.

Mindful Mindless
Encourage Discourage Encourage Discourage
Activating Externally Simplifying tax rules to make tax filing easier Placing signs to remind people not to litter Advertising that most people are recycling to increase recycling efforts Using fake speed bumps to discourage speeding
Boosting Externally Simplifying application processes for college grants to encourage higher-level education Installing car dashboards that track mileage to reduce gas usage Automatically enrolling for prescription refills to encourage taking medication Placing unhealthy foods in harder to reach places
Self-imposed Maintaining an exercise routine by agreeing to pay a small penalty if a gym session is missed Avoiding drunk driving by hiring a limo service beforehand Joining a peer savings group to encourage saving money Channelling money into a separate account to reduce the likelihood of it being spent

A guide to the process

Map the context

Identify factors that prevent individuals from following through with their intentions.

Consider four aspects of the decision-making process:

  • The properties of the decision: including incentives, motivations, and level of attention. Identify the default option
  • Information sources
  • Features of the individual’s mindset: are emotions a factor?
  • Environmental and social factors: such as peer pressure, complexity of the process, etc.

Make a decision map from this information

Select the nudge

Bottlenecks are a good place to start.

Map them onto the taxonomy through four questions:

  • Is there awareness but inability to do? Does the behaviour need to be activated?
  • Can they self-impose?
  • Will more cognition help or hinder?
  • Is it limited by a competing action, inertia? Should we discourage the competing or encourage the target?

Behavioural influences

  • Status quo: maintaining the current state
  • Endowment effect: value more something that is already in possession
  • Loss aversion: more attuned to losses than gains
  • Confirmation bias: accept information that confirms rather than infirm
  • Mental accounting: money is mentally allocated
  • Willpower: willpower is limited and needs to be replenished
  • Hyperbolic discounting: more value accorded to the now than the future
  • Choice overload: too many choices makes it hard to evaluate and decide
  • Information overload: too much information precludes evaluation and making a decision

Heuristics

  • Availability bias: mentally readily available information is used to make a decision rather than using a comprehensive set
  • Representativeness: use similar attributes to judge the likelihood of an event occurring
  • Anchoring and adjustment: Make estimate by adjusting from a particular reference value
  • Social proof: conform to observed or presumed behaviours by peers

Identify the levers for nudging

Identify constraints such as cost or resource availability.

Consider which part of the choice architecture can be acted upon.

Experiment and iterate

Prioritize among the selected nudges

Going all in may not be the best option. Consider:

  • Bottlenecks addressed by the nudges: go for upstream impact
  • Relative reach
  • Determine whether segments of the target audience have different behavioural preferences
  • Long-term effectiveness of the nudge

Test for effectiveness

Given that behavioural economics is still a relatively fledgling field and that much of the research done is theoretical in nature, it is important for the choice architecture to test and document the effectiveness of nudging strategies.

Test both the process and the outcome.

Used randomized samples for testing.

Consider false positives, other influences may be at work.

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