Has Nudge unintentionally led to airline marketing scams?

We sure hope not. Ian Ayres and and Jonathan Macey see an opt-out scam where airlines and flight aggregation sites like Orbitz set the default rule for flight insurance (typically between $10-$15). They wonder if Nudge is to blame? Say it ain’t so. Nudging, as we have tried to show in the book, can be used by shrewd manipulators.

In their recent best-selling book Nudge, Cass Sunstein and Richard Thaler show that default setting can be a powerful force for the social good. But default setting can also be a powerful force for mischief if controlled by those with ill intent.

We wonder whether the fact that opt outs were only recently introduced in the travel industry — and only after Nudge was published — is merely coincidental. Perhaps the insights in the book provided valuable, if unscrupulous, tips to the marketers who help design websites for the travel agency.

As lawyers and economists, we would have predicted that reputational sanctions would have kept Orbitz from engaging in these sorts of shenanigans. Experience, however, is proving us wrong.

Addendum: Ok, we know these scams were around long before Nudge and will be long after. Be on the lookout – and let us know about them! The Geary Behaviour Centre points to a nice 2006 FT article (pre-Nudge) by Eric Johnson and Daniel Goldstein about the power of defaults.

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  • Paul

    I don’t think Nudge is to blame, as I have noticed this practice done by another airline, easyJet, if I remember correctly, a couple of years ago.

  • delaneld

    As I said in that blogpost, I think that Nudge and the associated discussions around it may become a powerful force in improving financial and general consumer literacy. Of course, people have always been told to “read the small print” and of course some companies have always tried to put things in the small print that may be more beneficial to them than the consumers. However, behavioural economics and the more recent “Nudge” concept gives a very strong intellectual background on how to encourage active decision making and may act as a countervailing force and thus improve market functioning.

    The short paper by Beshears, Choi, Madrian and Laibson on how preferences are revealed is a nice discussion relevant here. They, more or less, argue that something is actually valuable if people would choose it if making an informed and active decision. Several other authors have made a similar point and it would be worth thinking further about how independent consumer groups could embed such a test into their consumer recommendations.