Deciding Nuge Presentation

8/10/2019 Deciding Nuge Presentation

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DECIDING

BORHADE

BHEDA

DOVAL H

RANE


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What is a nudge?

A nudge is any aspect of the design of a choicarchitecture)that alters peoplesbehavior in a predi

without forbidding anything or actually changing thall.


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Spock or Homer?


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There is no such thinganudgeless choice


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When do we especially need nudg


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When do we especially need nudg

When we see the benefits now, costs later

When encountering decisions we make infrequently

When feedback is not immediate

When it is hard to imagine the possible outcomes


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How to Predict Homers Actions

We have predictable mental biases

We predictably succumb to temptation

We predictably follow the herd


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So how to help Spock defeat Home

iNcentives Understand mappings

Defaults

Give Feedback

Expect Error

Structure Complex Choices


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How can we help in your FinanciDecision Making?

Savings

Choosing where to invest

Student Loans

Credit Cards


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SAVINGS

How much time do you spend?


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SAVINGS

What percentage of your current salayou save/want to save?

Pre-commitment : Save more tomor


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BUY OR SELL?

Stock A Stock B

Which stock would you buy and which would you prefer to

X


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BUY HIGH, SELL LOW!

People tendpeak and

This is thmaxi


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THE DIVERSIFICATION HEURIST

When in doubt,

diversify!

DIVERSIFICATION IS A POWERFUL CONCEPT BUT YOU MUST UNDERSTAND WHAT THE

I should have computed the historic co-varianc

asset classes and drawn an efficient frontier. Ins

I split my contributions fifty-fifty between bonds

equities.Harry Markowitz

LOAN PRICING


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LOAN PRICING

Fixed Rate loans

Variable Rate loans

Teaser rate (low initially and

increases later)

Prepayment penalties

Principal-free loans (genesis for

the sub prime lending)

Which one will you go

borrowing (say. $ 1000

1. Fixed rate (10% p.a

2. Discount rate (7.5%($ 1000)

STUDENT LOANS


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STUDENT LOANS

FEDERAL/ STAFFORD LOANS

Features:

Govt. pays interest while student is inschool

Govt. pays the lender if student defaults

Requirements

Very complicated application

Hundreds to question

Proof for family income

Approval from college

PRIVATE LOANS

Features:

Like buying a pizza Get loans within 15 m

Requirements

Proof of college enrol

Can be used for any p

Trick High interest rates

Misleading payment tconditions


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CREDIT CARDS


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CREDIT CARDS

Credit Cards

Mode of Payment

Ready Source of Liquidity

Food for your Thought:

1.4 billion credit cards in 2004 for 164millioncardholdersan average of 8.5cards per cardholder

In 1989 the average American familyowed its credit card companies $2,697

In 2007 that number had grown to about$8,000.

Study by Drazen PreDuncan Simister

Americans on an averpay twice as much to Boston Celtics basketcould pay with their cthan cash

Average Game Price: $

How much will they pmiles?

CREDIT CARDS


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CREDIT CARDS

Nudges that would help the users:

Electronic Version of Reports

2 Bills for Credit Cards

Summary Sheet and Informationregarding fee

User enforced Credit limits on specificsectors

Opt in to Credit Limit Increases

Message

For mortgages, school lo

cards, life is far more comit needs to be, and peoplexploited

Improve Choice Architecpeople fare better

THANK YOU!


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THANK YOU!

NUDGE!

XXXXX

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Deciding Nuge Presentation