Christina Gravert

 

For this post, I interviewed Christina Gravert. She is an Assistant Professor at the University of Copenhagen in Denmark. She is a behavioral and experimental economist. Her research focuses on why people don’t always do what they plan, and how to design policies that help them to do so, in their best interest. 

 I interviewed Professor Gravert about her paper “The Hidden Costs of Nudging: Experimental Evidence from Reminders in Fundraising,” which she wrote with Mette Trier Damgaard. In this paper, the authors carried out a field experiment, which is like an experiment in the lab, but it’s done out in the real world. They worked with a charity to determine the effects of email reminders about giving. These reminders are examples of what behavioral economists call nudges, small deliberate changes that are made to improve well-being. The charity, of course, hoped that their reminders nudged their members to give, and hence increased overall donations. 

There were two groups of donors in the experiment. One group got a single email asking for a donation (the control group). The other group also got a reminder a week later (the treatment group).  This reminder has what the authors call an annoyance cost. This is a very nice example of a non-monetary cost, which economists always include, in addition to monetary costs, when trying to understand decisions people make. Here the annoyance can be the guilt felt or the perceived pressure to give, and/or the time it takes to read the email.  However, Professor Gravert emphasized to me that all of the people in this experiment had donated to the charity before, and had opted in to receiving emails.

So, what were the consequences of the reminder emails? In general, the results were that people don’t donate unless they receive an email, and they tend to donate within a day or two of receiving an email. The reminders increased the number of people donating by about 66%. However, the reminders had another unintended consequence, which was to increase the rate of unsubscribing from emails from the charity, due to the annoyance cost. In the treatment group this rate was 3.7%, and in the control group it was only 2.1%. Doing the math, the difference between these is 76%. Overall, it’s hard to say in the long run whether reminders will help or hurt donations. The 66% is the effect on one-time donations, and unsubscribing is permanent (unless the person decides to sign up again with a different e-mail address). The net effect depends on several factors, including the relative value the charity places on donations now versus those in the future. In the paper, the authors give a range of estimates for the net effect.  

I asked Professor Gravert about alternative strategies that charities could use to avoid this unintended consequence. She told me that charities often target their reminders based on demographic factors of their donors. She recommends that they instead examine their donors’ behavioral patterns more carefully, and target on these. For example, some people always give towards the end of the year, to take advantage of the tax benefits. Another strategy, already used by charities, is to encourage people to opt-in to a direct debit donation scheme, eliminating the need for reminders. They could also allow donors to adjust the frequency of the emails themselves, or they could use text messages instead of emails. 

Speaking of text messages, in related work in progress, Professor Gravert and co-authors Kai Barron, Mette Trier Damgaard, and Lisa Norrgren, are conducting another field experiment with pregnant women in South Africa. Over the course of three months, they are using text messaging to remind the women to take their iron pills, with the goal of identifying more precisely which type(s) of annoyance costs might cause unsubscription. This is a very nice example of a reminder that has the best interest of the person in mind, right?

Let’s talk! I would love to know what you think about this example of unintended consequences. Please submit comments and questions.