The Nudge Theory

The Nudge Theory

Share This Post


A father was cajoling his daughter to jump into the pool.

The little girl was adamantly refusing.He was getting frustrated.

Then something happened.

He sweetened the offer with a promise of a big two-scoop Chocolate ice cream.

Splash! She was in the water before he could count 3! That little incentive was a nudge.

A nudge is a small act – an extrinsic one – that triggers people to change behaviours and take decisions.

The nudge theory is pretty popular worldwide.

It is widely used in 3 forms:

Perception nudges

A food survey in the USA in 2012 revealed that people majorly opted for ‘99% fat free’ in place of ‘1% fat’!

It’s common perception psyche.

Motivation nudges

A municipal corporation in the UK was sending repeated mails to tax defaulters to pay up.

Without result, till it changed a tactic. It sent a ‘personalised’ email to every defaulter with coloured graphics depicting details of tax payers in the neighbourhood with no dues and 63% of the defaulters paid up in 3 days.

Ability nudges

In March 2009, the admin staff at the Schiphol Airport stuck up tiny fly shaped stickers on the urinals in the men’s wash rooms.

It worked. Men aimed at the flies And ‘spillages’ reduced by 80%.

Behavioural economist, Dr. Richard Thaler, won the 2017 Nobel for his outstanding work on the subject.

Nudge theory is a concept in behavioral economics, political theory, and behavioral sciences that proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision-making of groups or individuals. It says that people, rather than being forced, can be encouraged and influenced to pursue or desist from certain actions through nudges.

Nudges are not mandates. So, while there is encouragement, there is no compulsion to comply and people have the freedom to choose other options.

“Putting fruit at eye level counts as nudge. Banning junk food does not.” Tax breaks under Section 80C are a nudge to encourage people to invest in financial instruments such as the PPF and ELSS in place of gold or property. Insurers use the ‘nudge’ of lower premiums on life covers to encourage customers to keep away from smoking. Mutual fund SIPs, by making regular investing the default option, are also a nudge to investors to avoid panicking during market falls.

The Nudge Theory can be used to drive favourable behaviour and avoid unfavourable ones, without resorting to drastic intervention and penal action.

‘Nudge’ your friends and family to desired action and stay blessed forever.