Nudge Theory & Choice Architecture
Defaults, framing, and salience: steering choices without restricting them.
Definition
Choice architecture: shaping decisions through defaults, framing, and salience while leaving all options open, 'libertarian paternalism'.
Key equation
Mechanism: default effect = status-quo bias + implied endorsement + effort cost
The intuition
Switching pension enrolment from opt-in to opt-out moves participation from ~40% to ~90%, no incentives changed, only the path of least resistance. If small frictions move big decisions, the frictions were never neutral.
Exam tip
The exam contrast: nudges preserve choice sets (vs taxes/bans); critique via 'who nudges the nudgers?' and evidence of small average effects at scale.
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