On the equilibrium effects of nudging

Research output: Contribution to journalArticlepeer-review

Abstract

Consumers’ systematic decision biases make them vulnerable to market exploitation. The doctrine of libertarian paternalism maintains that this problem can be mitigated by soft interventions (nudges) like disclosure or default architecture. However, the case for nudging is often made without an explicit model of the boundedly rational choice procedures that lie behind consumer biases. I demonstrate that once such models are incorporated into the analysis, equilibrium market reaction to nudges can reverse their theoretical consequences.

Original languageEnglish
Pages (from-to)389-416
Number of pages28
JournalJournal of Legal Studies
Volume44
Issue number2
DOIs
StatePublished - Jun 2015

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