Nudge or Sludge? An Experimental Game Illustrating How Misunderstood Scientific Information Can Change Consumer Behavior

Laura Paul, Olesya Savchenko, Maik Kecinski, and Kent Messer

Scientific information can be designed to help people understand and describe the natural world. Consumers regularly seek out information about their food and drink to help inform their decisions. While this search is generally viewed as a positive process, it becomes troubling when consumers respond negatively to scientific information, even when this scientific information does not intend to convey a negative signal. This misunderstanding and stigmatization can be difficult from the perspective of federal and state regulations related to the labeling of food and drink. Labels have often been compared to the “nudges” popularized by behavioral economics. Nudges are low-cost interventions made at the time of a decision, and they can have large effects on behavior, but they have been referred to as “sludges” when they end up misleading people. The objective of this paper is to introduce an engaging and interactive classroom activity using a second-price auction and an informational label treatment to introduce behavioral economics and measurement of its effects. 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.