4. Nudging

Question 1

What is nudging ?

Answer 1

Subtle guiding of people’s choice without restricting their freedom of choice.

ex: salad bar close to the entry instead of fries

Question 2

What are the 3 types of economics analyses

Answer 2

1. Normative theories: model how people should behave
2. Descriptive theories: describe how people behave
3. Prescriptive approaches: offer advice on how people can improve their decision making and get closer to the normative ideal

Question 3

What is the hyperbolic discounting bias ?

Answer 3

Psychological bias where people prioritize immediate rewards and satisfaction over future rewards.
**Slide 11

Question 4

What are the four key features of the SMarT Program

Answer 4

1. Ask to increase contribution before their scheduled pay increase (hyperbolic dicounting)
2. Contribution is increased if they join (loss aversion)
3. Contribution continues to increase until it reaches a preset max (inertia)
4. Employee can opt out at any time (nudging)
   **RESULT: IT WORKED