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Nudge or Sludge? An In-Class Experimental Auction Illustrating How Misunderstood Scientific Information Can Change Consumer Behavior

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  • Paul, Laura A.
  • Savchenko, Olesya M.
  • Kecinski, Maik
  • Messer, Kent D.

Abstract

Scientific information can be used to help people understand and describe the world. For example, consumers regularly seek out information about their food and drink to help inform their purchasing decisions. Sometimes, however, consumers can respond negatively to this information, even when the information did not intend to convey a negative signal. These negative responses can be the result of misunderstandings or strong, visceral, emotional behavior, that can be challenging to foresee and once arisen, difficult (and expensive) to mitigate. In this paper, we show how educators can use an in-class economic experiment to introduce the power of a sludge—a small behavioral intervention that leads to worse outcomes. We provide a step-by-step guide to take students through a demand revealing design using a second-price, willingness-to-accept (WTA) auction that tests preferences for tap water and bottled water when students receive total dissolved solids (TDS) information. Additional classroom discussion topics are presented, including comparing nudges and sludges, the public response to the treatment of tap water, and the role of safety information in consumer response.

Suggested Citation

  • Paul, Laura A. & Savchenko, Olesya M. & Kecinski, Maik & Messer, Kent D., 2022. "Nudge or Sludge? An In-Class Experimental Auction Illustrating How Misunderstood Scientific Information Can Change Consumer Behavior," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 4(01), March.
    • Handle: RePEc:ags:aaeatr:320046
    DOI: 10.22004/ag.econ.320046
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    References listed on IDEAS

    as
    1. Hummel, Dennis & Maedche, Alexander, 2019. "How effective is nudging? A quantitative review on the effect sizes and limits of empirical nudging studies," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 80(C), pages 47-58.
    2. François Salanié & Nicolas Treich, 2009. "Regulation in Happyville," Economic Journal, Royal Economic Society, vol. 119(537), pages 665-679, April.
    3. Cristina Bicchieri & Eugen Dimant, 2022. "Nudging with care: the risks and benefits of social information," Public Choice, Springer, vol. 191(3), pages 443-464, June.
    Full references (including those not matched with items on IDEAS)

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