Teaching and Educational Methods
Nudge or Sludge? An In-Class Experimental Auction Illustrating How Misunderstood Scientific Information Can Change Consumer Behavior
Laura A. Paul(a), Olesya M. Savchenko(b), Maik Kecinski(a), and Kent D. Messer(a)
University of Delaware(a), University of Florida(b)
JEL Codes: A20, D82, D83, D90, D91, Q25, Q28
Keywords: Behavioral economics, classroom game, experiential learning, informational nudge, second-price auction, willingness-to-accept
Publish Date: March 11, 2022
Volume 4, Issue 1
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Abstract
Scientific information can be used to help people understand and describe the world. For example, consumers regularly seek out information about their food and drink to help inform their purchasing decisions. Sometimes, however, consumers can respond negatively to this information, even when the information did not intend to convey a negative signal. These negative responses can be the result of misunderstandings or strong, visceral, emotional behavior, that can be challenging to foresee and once arisen, difficult (and expensive) to mitigate. In this paper, we show how educators can use an in-class economic experiment to introduce the power of a sludge—a small behavioral intervention that leads to worse outcomes. We provide a step-by-step guide to take students through a demand revealing design using a second-price, willingness-to-accept (WTA) auction that tests preferences for tap water and bottled water when students receive total dissolved solids (TDS) information. Additional classroom discussion topics are presented, including comparing nudges and sludges, the public response to the treatment of tap water, and the role of safety information in consumer response.
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Articles in this issue
Trading Commodity Futures and Options in a Student-Managed Fund
Matthew A. Diersen and Zhiguang Wang
Adaptation of Teaching Strategies During the COVID-19 Pandemic
Luis Moisés Peña-Lévano and Grace Melo
Nudge or Sludge? An In-Class Experimental Auction Illustrating How Misunderstood Scientific Information Can Change Consumer Behavior
Laura A. Paul, Olesya M. Savchenko, Maik Kecinski, and Kent D. Messer
Negotiating for a Grain Elevator Purchase: Valuations of Willingness to Buy and Willingness to Sell
Austin Liepold, Marin Bozic, and Michael A. Boland
Why No Debt? A FRICTO Analysis of the Capital Structure of Cal-Maine Foods Inc.
Carlos J.O. Trejo-Pech and Susan White
The Knowledge and Skills Required to Be a Successful Entrepreneur
Luis Alberto Sandoval