Do Nudges Reduce Disparities? Choice Architecture Compensates for Low Consumer Knowledge

Kellen Mrkva, Nathaniel A. Posner, Crystal Reeck, Eric J. Johnson

Research output: Contribution to journalArticlepeer-review

58 Citations (SciVal)

Abstract

Choice architecture tools, commonly known as nudges, powerfully impact decisions and can improve welfare. Yet it is unclear who is most impacted by nudges. If nudge effects are moderated by socioeconomic status (SES), these differential effects could increase or decrease disparities across consumers. Using field data and several preregistered studies, the authors demonstrate that consumers with lower SES, domain knowledge, and numerical ability are impacted more by a wide variety of nudges. As a result, “good nudges” designed to increase selection of superior options reduced choice disparities, improving choices more among consumers with lower SES, lower financial literacy, and lower numeracy than among those with higher levels of these variables. Compared with “good nudges,” “bad nudges” designed to facilitate selection of inferior options exacerbated choice disparities. These results generalized across real retirement decisions, different nudges, and different decision domains. Across studies, the authors tested different explanations of why SES, domain knowledge, and numeracy moderate nudges. The results suggest that nudges are a useful tool for those who wish to reduce disparities. The research concludes with a discussion of implications for marketing firms and segmentation.

Original languageEnglish
Pages (from-to)67-84
Number of pages18
JournalJournal of Marketing
Volume85
Issue number4
Early online date21 Jan 2021
DOIs
Publication statusPublished - 1 Jul 2021

Bibliographical note

Funding Information:
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Grants from the Alfred P. Sloan Foundation (G-2018-11114) and the National Science Foundation (UV-GA11247-155597) supported this research.

Funding Information:
The authors would like to thank Vicki Morwitz, Gretchen Chapman, Antonia Krefeld-Schwalb, Silvio Ravaioli, Cass Sunstein, and members of the Columbia University PAMLab for feedback on this research and Erica Shah, Simon Xu, Dianne Wanja Waweru, and Xiaoyun Qin for research assistance. The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Grants from the Alfred P. Sloan Foundation (G-2018-11114) and the National Science Foundation (UV-GA11247-155597) supported this research.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Grants from the Alfred P. Sloan Foundation (G-2018-11114) and the National Science Foundation (UV-GA11247-155597) supported this research.

Keywords

  • defaults
  • financial literacy
  • nudges
  • numeracy
  • socioeconomic status

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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