The good side of Nudge
Nudging is commonly used in the public and private sectors in order to change people's behaviors. As Richard Thaylor describes it, nudge is often used “to [help us] make decisions that are in our own best interest.”. This type of behavioral economics strategy is used on the assumption that humans not always choose the best option or the one that provides them a better outcome in the long run. This is justified by human being’s inefficient information processors, limited cognitive, and decision-making processes.
Nudge can be achieved in different ways. By setting a default option, one can see that people normally accept the default option and few actually change to a different one. This is why, for instance, the number of organs donors in Spain is the highest among European countries. Spain's policy is based on an opt-out rule, where everyone is signed for being a donor automatically, and to revert this, they have to act on it - which the majority of people don´t do.
Another way to achieve a nudge is to create a psychological anchor, in which people are provided with information that shapes future behavior. For instance, when donating to a charity, you may face a statement of the most common donation value, which tends to make you provide a similar value to the one stated.
One more type of nudge can be changing the ease of certain options, which would mostly be better for people in the long-run, such as having healthy snacks more accessible and at eye compared to unhealthy ones.
The dark side of Nudge
Although it is clear the good effects of nudges on helping people to make better decisions and to have long-term thoughts, nudge use can be sometimes ineffective and even used with not-so-good aspirations.
Inefficient Nudges
Starting with some examples of how it can be inefficient, nudges used in environmental concerns, and in a way to change people's actions to become greener. In these cases, a feeling of “I have already done my part” makes people feel that the act they were performing due to the nudge is enough. For instance, it was found that attaching a fake set of eyes above the switching lights could be an effective way to make people turn-off the lights. However, the feeling of contribution to the environmental causes was something fulfilled by this action, and people's green change was based on only this, preventing them to take further action on climate change. So, although in theory, it can be helpful in addressing environmental concerns, it lacks behind.
Unpredictable outcomes
Some nudges even though trying to achieve a good and helpful result for the people being nudged, can sometimes result in the opposite result. Let’s take the example of sending letters to people telling them how much their neighbors consume electricity compared to them. This would be a good nudge to induce a reduction in electricity consumption to the high-value consumers. However, an unpredictable result broke down, with the low-usage consumers starting to increase their consumption, as they saw they were consuming less than others.
Inappropriate use
Moreover, the darker side of nudging appears when it is used to achieve purposes that do not benefit people. Let’s focus on the examples presented before regarding the good side of nudge: default rules, psychological anchor, and changing the ease of certain options. All these types of nudges can be used wrongly.
Marketing and advertising efforts normally use it to ensure the selling of a specific product. Default rules that do not benefit the consumer are probably the automatic subscription of a certain newsletter or website content, which does not provide the consumer any long-term benefit, rather than benefiting company awareness.
Moreover, the psychological anchor is commonly used by companies to set a price on consumers' minds making it seem more reasonable. As Steve Jobs presented the Ipad price back in 2010: “an amazing product tremendous breath if you listen to the pundits we're going to price it at under $1,000. When we set out to develop the technical goals and user interface goals but we had a very aggressive price goal of lots of people and just like we were goals we have met our cost goals and I am thrilled to announce to you that the iPad pricing starts not at $999 but at $499”. Anchoring the price at 1000$, in the beginning, makes the actual price of 499$ relatively cheap. This psychological anchor technique is used not to ensure consumer welfare but for the purpose of selling the product.
Finally, the nudge type of changing the ease of certain options is a commonly used practice by retailers in-store architecture. Certainly, most of you had already bought some snacks or sweets while being already in the cashier. This is normally because we are induced by the convenience of all available products in the cashier. These options are normally never healthy, which contracts with good use of this nudge type.
Conclusion
Although nudges can be used for good reasons and actually improve the decision-making process of consumers to decide wisely, it is nowadays much used by companies through marketing in not-so-good ways.
To ensure that nudges are good and actually have a good impact on people’s decisions, one can establish three principles to guide the use of nudges: it should be transparent and never misleading; it should be easy and quick to opt-out of the nudge; there should be a good reason behind the nudge, believing that the behavior resulting from it will improve people’s welfare.
References
Mullett, T. (2022). What are the advantages and disadvantages of nudging?
National Library of Medicine. (2003). More countries hoping to copy Spain's organ-donation success.
Nudge: How Small Changes Can Significantly Influence People’s Choices. (NA).
Robison, J. (2018). To Nudge or Not to Nudge? The Limitations & Pitfalls of Behavioral Economics.
Steve Jobs Announces iPad Price (2010). [Motion Picture].
The New York Times. (2015). The power of nudges for good and bad.