The Effects of Information Nudges on Consumer Usage of Digital Services under Three-Part Tariffs

Abstract

We develop a dynamic model to examine how information nudges influence digital services’ consumer usage behavior and welfare under a three-part tariff structure. We study two types of information nudging: nudging through full and nudging through partial information provision. In the former, information nudges are provided to inform consumers of their usage status at every decision point in a billing cycle. In contrast, in the latter, consumers are nudged at one or more decision points within a billing cycle but not throughout the billing cycle. Our model considers two dimensions of consumer heterogeneity: inattentiveness and preference. Furthermore, our model investigates an important but un..