The Freakonomics blog has a great post on the behavioral economics behind minimum-payment requirements for credit cards. Citing some recent research by Neil Stewart, the post explains how providing a minimum threshold may induce people to actually make a smaller payment than they otherwise would have. This behavior comes about because of our susceptibility to anchoring: we tend to base our decisions on even arbitrary values we are given as starting points (see here for some examples).
This result is clearly of interest to behavioral economists: decades of research at the intersection of psychology and economics has led some observers to suggest that these tools be used in policy. That is, the irrational behavioral foibles of humans can be used to "nudge" them into making the right decisions (the term comes from a new book by Richard Thaler and Cass Sunstein).
Are there other avenues where nudges may be effective? And are there (other) examples where well-intentioned nudges may be counterproductive? A good illustration for both queries comes from Indian matrimonial websites. Like all social networking, a given user's experience on a martrimonial website depends on the activities of his or her peers. Inactive individuals do not contribute anything to the marketplace, while active ones generate all sorts of positive externalities. As such, it is in the best interest of the website company to get people active, either by introducing clarity to the user interface, making the website more fun, recruiting tons of singles, or by nudging existing users to make more contacts.
Regarding the latter, one particular website keeps track of whether a given user responds to an expression of interest from another user and the number of times that user accesses the website. Based on their activity patterns, slow or shy users are then sent an e-mail urging them to use the website by saying they are (1) missing out and (2) being rude to others by not responding. While perhaps not based in behavioral economics per se, the idea is to use some form of shame and opportunity cost argument to get people more involved.
But does this nudge work? I could easily see something like this being counterproductive. After all, nobody likes a nag, and I would bet there are plenty of people who would stop using the website just to avoid being made to feel guilty. Furthermore, messages (1) and (2) are conflicting: one is positive and the other negative. This might just confuse people.
I think this sort of thing is ripe for an experiment. However, this would require some alternate nudge option. Any ideas?
3 comments:
Atheendar,
Interesting post!
I am co-founder of Bandhan.com, a matrimony search engine. We don't host any profiles, neither do we require user to register with us to use our service. In that case, how do you think we can nudge users?
I am reachable at shashikant at gmail to continue the conversation.
--shashi
Atheen, I don't have a matrimony site as of yet. But when I do, you're on the board of directors.
Good to see you posting again!
Gujarati matrimony for Gujaratis is provided by Matchfinder since 2013. This website offers premium and also free matrimonial services to registrants.
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