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    The Marginal Cost of Transparency: Do honest nudges work?


    Gustavsson, John (2017) The Marginal Cost of Transparency: Do honest nudges work? Working Paper. Department of Economics Finance & Accounting: Working Paper N289-17. (Unpublished)

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    Abstract

    Libertarian paternalism (LP), a term which refers to the practice of “nudging” consumers into making “good” decisions, has grown steadily in popularity in recent years as an alternative to sin taxes and other traditional forms of paternalism. Critics however believe that relying on psychological manipulation is inherently unethical as consumers are typically unaware of the nudge and the intention behind it. While proponents of LP insist that they want LP interventions to be conducted in an ethical manner, there is so far little evidence that LP interventions, when conducted in such a manner, still have the desired effect. In this paper I introduce the term Marginal Cost of Transparency (MCoT), the difference in treatment effect of an LP and what I call a Transparent Libertarian Paternalism (TLP) intervention; a type of LP intervention where consumers are made aware of the nudge and why it is there. The results indicate that the MCoT is not statistically significant from zero and that the answer to the question “Do honest nudges work?” is Yes. Moreover, the results indicate that Autonomy-enhancing paternalism (AEP), a type of paternalist interventions that work to enhance the autonomy of consumers (mainly by providing information) and unlike LP do not rely on psychological manipulation, fares at least as well as the LP/TLP treatments when stakes are high.

    Item Type: Monograph (Working Paper)
    Keywords: nudge theory; libertarian paternalism; ethics; psychological manipulation; Autonomy-enhancing paternalism;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 9109
    Depositing User: John Gustavsson
    Date Deposited: 03 Jan 2018 14:54
    Publisher: Department of Economics Finance & Accounting: Working Paper N289-17
    URI:

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