Nudging Virtuous Behaviours Without Crowding-Out Other Ones: Micro-Foundations to Behavioural Interventions

Abstract

Nudges have become a popular instrument in the toolbox of policymakers. Yet, a growing number of evidence suggests some of them could influence other decisions than those targeted, raising the risk to inadvertently crowd-out the motivation to undertake further virtuous behaviours. To analyse such spillover effects, I develop micro-foundations to three hypothesised cognitive mechanisms leading to behavioural changes. Namely, I consider nudges that trigger either a preference for consistency, a willingness to signal an identity, or affect one's perceived ability to achieve results. I model individuals as consuming goods for different motives, such as preserving the environment. As such, goods are represented as combinations of attributes (e.g., carbon footprint). Two cases are considered. Individuals either make decisions to consume for a given motive (e.g., eating vegetarian) based on future decisions undertaken for the same motive (e.g., car-sharing) or make their current decisions in isolation to any other future decisions. In the first case, individuals can either perceive current and future decisions as complementary or substitutable to achieve the goal associated to the motive they are undertaken for (e.g., reducing one's environmental impact). This affects the effectiveness of nudges targeting current decisions. When they perceive these decisions as substitutable, nudges triggering a preference for consistency or/and a will for conformity are always less effective than nudges triggering other cognitive mechanisms. When individuals perceive them as complements, such nudges dominate any other interventions. What is more, I show how nudges can yield spillover effects on future choices. Interventions triggering a preference for consistency maximise these spillover effects.