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Optimal nudging

Abstract

People’s judgments and decisions often deviate from classicalnotions of rationality, incurring costs to both themselves and tosociety. Previous research has proposed that the cost of thesebiases can be reduced by redesigning decision problems basedon theories of human decision making. These modifications—or nudges—can have dramatic results and have been success-fully applied to variety of domains. However, the formal un-derpinning of nudge theory is limited, and it is not always clearwhat the effect of a nudge will be before it is implemented. Asa result, designing nudges can be time consuming and error-prone. In this paper, we propose an automatic method for de-riving optimal nudges. The method is based on a resource-rational model, which assumes that people make decisions ina way that achieves a near-optimal tradeoff between the costand benefits of deliberation. We then frame nudges as modi-fications to the costs of different cognitive operations, encour-aging the cognitively frugal decision maker to consider someproblem features over others. As a proof of concept, we applythe method to the Mouselab process-tracing paradigm, findingthat optimal nudges lead participants to make better decisionswith less cognitive effort.

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