DP13299 Information Nudges and Self-Control

Author(s): Thomas Mariotti, Nikolaus Schweizer, Nora Szech, Jonas von Wangenheim
Publication Date: November 2018
Keyword(s): information design, Information Nudges, Present-Biased Preferences, Self-Control
JEL(s): C73, D82
Programme Areas: Public Economics, Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13299

We study the optimal design of information nudges for present-biased consumers who have to make sequential consumption decisions without exact prior knowledge of their long-term consequences. For arbitrary distributions of risk, there exists a consumer-optimal information nudge that is of cutoff type, recommending consumption or abstinence according to the magnitude of the risk. Under a stronger bias for the present, the target group receiving a credible signal to abstain must be tightened. We compare this nudge with those favored by a health authority or a lobbyist. When some consumers are more strongly present-biased than others, a traffic-light nudge is optimal.