APPLIED MICRO: A Model of Information Campaigns; Professor Judd Benjamin Kessler (University of Pennsylvania)

Abstract: 

Nudge-style interventions are popular but are often criticized for being atheoretical. We present a model of information nudges (i.e., interventions that provide useful but imperfect information about the utility of taking an action) based on Bayesian updating in a setting of binary choice. The model makes two main predictions: One, the probability of a positive treatment effect should be increasing in the baseline take-up rate. Two, across studies, as baseline rates increase from 0 to 1, the expected treatment effect has a “down–up–down’’ shape. A surprising corollary of both predictions is that treatment effects are expected to be negative for low baseline rates. We use reduced-form and structural methods to conduct a meta-analysis of 75 information nudges and corroborate both predictions. Both the meta-analysis and a novel survey of nudge experts suggest the intuition in the model is not currently known. Finally, we provide guidance for practitioners about the environments in which information nudges will positively affect a desired behavior and those in which they may backfire.

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