The Welfare Effects of Information Nudges - Evidence from a Natural Field Experiment
Last registered on May 17, 2018

Pre-Trial

Trial Information
General Information
Title
The Welfare Effects of Information Nudges - Evidence from a Natural Field Experiment
RCT ID
AEARCTR-0002814
Initial registration date
March 28, 2018
Last updated
May 17, 2018 2:05 PM EDT
Location(s)

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Primary Investigator
Affiliation
University of Münster
Other Primary Investigator(s)
PI Affiliation
University of Münster
PI Affiliation
University of Bonn
Additional Trial Information
Status
In development
Start date
2018-03-29
End date
2018-12-31
Secondary IDs
Abstract
A small body of the recent literature in economics analyzes how the negative welfare effects of behavioral biases can be countered by taxes. While there is an ongoing debate about whether governments should address behavioral biases by taxes or nudges (e.g. sugar taxes vs. food labels), little is known about how these policy tools perform relative to each other. One challenge for such a comparison is the limited evidence of how nudges affect choices and welfare.

We intent to contribute to this question by analyzing the welfare effects of information nudges. A particular feature about most of the information nudges employed in the real world is that they only coarsely inform consumers about the relevant topic. We model information nudges as noisy signals that coarsely inform consumers about the uninternalized consequences of a choice. Our model provides sufficient statistics to analyze the welfare effect of a coarse nudge in comparison to a more specific nudge and an internality tax.

The theoretical model guides our design of a large-scale natural field experiment in which we look at the case where the internality distortions are caused by biased beliefs about the benefits of energy efficiency. We construct two nudges that differ in their degree of coarseness and compare its effect on consumer behavior. By combining these treatments with exogenous price variation for different lighting technologies, we are able to quantify the welfare effects of nudges with different levels of coarseness and compare it to a subsidy on energy-efficient light bulbs.

Our experimental design further incorporates a novel approach to control for bias heterogeneity post-treatment in a between-subject design. This approach circumvents the need for within-subject designs increasingly used in behavioral welfare economics.
External Link(s)
Registration Citation
Citation
Götte, Lorenz, Andreas Löschel and Matthias Rodemeier. 2018. "The Welfare Effects of Information Nudges - Evidence from a Natural Field Experiment." AEA RCT Registry. May 17. https://www.socialscienceregistry.org/trials/2814/history/29615
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2018-03-29
Intervention End Date
2018-05-31
Primary Outcomes
Primary Outcomes (end points)
The number of LED, CFL, halogen and incandescent light bulbs purchased.

The average energy efficiency level (wattage) of the products purchased.

The price elasticity for all four light bulb technologies (incandescent, halogen, CFL, LED).

We also estimate whether our interventions affected the extensive margin, i.e. the probability of purchasing a light bulb.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Visitors of an online shop are randomly assigned to different groups in a 3x5 between-subject design.

We vary both the prices of different lighting technologies and the information provided on energy efficiency. This experimental design facilitates the estimation of price elasticities for different lighting technologies under different sets of information provision.

After customers went through the purchasing decision they receive an invitation to participate in a survey. The survey elicits variables such as energy and financial literacy, income, patience, environmental attitudes and other consumer-specific characteristics.
Experimental Design Details
Not available
Randomization Method
This experiment is between-subject. The retailer will use a professional A/B-testing tool from a third-party provider to randomly assign each visitor into one of 15 experimental groups with equal probability.
Randomization Unit
The randomization unit is the HTTP-Cookie of the visitor.
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
The treatments are not clustered.
Sample size: planned number of observations
Around 1.4 million observations.
Sample size (or number of clusters) by treatment arms
Around 93,333 individuals per treatment.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
University of Münster
IRB Approval Date
2018-02-12
IRB Approval Number
N/A