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

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

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

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We find that nudges can reduce socioeconomic disparities, because they impact low-SES consumers most. Additionally, nudges have a larger impact on consumers with lower domain knowledge and numerical ability. “Good nudges”, which pre-selected a beneficial option or sorted options from best to worst, helped low-SES and low-knowledge consumers more than high-SES and high-knowledge consumers. “Bad nudges”, which pre-selected harmful options, also impacted low-SES and low-knowledge consumers most, causing the largest negative effects among these low-SES consumers.

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Related Marketing Courses: ​
​​​​Consumer Behavior; Digital Marketing; Retail Marketing

Full Citation: ​
Mrkva, Kellen, Nathaniel A. Posner, Crystal Reeck, and Eric J. Johnson (2021), “Do Nudges Reduce Disparities? Choice Architecture Compensates for Low Consumer Knowledge,” Journal of Marketing

Article 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 pre-registered studies, we 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, financial literacy, and numeracy than among those with higher levels of these variables. Compared to “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, we tested different explanations of why SES, domain knowledge, and numeracy moderate nudges. Our results suggest that nudges are a useful tool for those who wish to reduce disparities. We discuss implications for marketing firms and segmentation.

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Special thanks to Demi Oba and Holly Howe, Ph.D. candidates at Duke University, for their support in working with authors on submissions to this program.

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Kellen Mrkva is a Postdoctoral Scholar, Columbia University, USA.

Nathaniel A. Posner is Lab Manager, Columbia University, USA.

Crystal Reeck is Assistant Professor, Temple University, USA.

Eric J. Johnson is Norman Eig Professor of Business, Columbia University, USA.