Thursday, December 15, 2016
Biases can influence important decisions in social, political, and economic environments, but little is empirically known about whether and how individuals try to exploit others’ biases in strategic interactions. For instance, people must often decide between giving others choice sets with positive or certain options (likely influencing them toward safer options) versus negative or risky options (likely influencing them toward riskier options). In this paper, we study nudge strategies, strategic decisions about how to exploit others’ biases. We show that individuals’ nudge strategies are distorted towards presenting choice sets with positive or certain options, across nine experiments involving diverse samples (including business executives, law students, business students, medical students, and online adults) and multiple important contexts (including public policy, business, and medicine). In many cases, this distortion actually causes a majority of people to use a nudge strategy that backfires. Surprisingly, people’s predictions about the directional effects of nudge strategies are generally correct. Thus, simply prompting people to consider their own predictions can improve nudge strategies that would otherwise be suboptimal. The evidence is consistent with meta-prospect theory, in which properties familiar from prospect theory generate distortions in nudge strategies; for example, loss aversion generates a distortion towards presenting gain frames over presenting loss frames. Overall, our results suggest that improving well-intentioned but suboptimal nudge strategies is a feasible objective which could lead to substantial benefits for both individuals and society.