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

Choice architecture tools, commonly known as nudges, can powerfully impact decisions and 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 several pre-registered studies as well as surveys of real retirement decisions, we demonstrate that consumers with lower SES, lower domain knowledge, and lower numerical ability are impacted more by a wide variety of nudges. As a result, “good nudges” that were designed to facilitate 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” that were designed to facilitate selection of inferior options exacerbated choice disparities. These results generalized across real retirement decisions, different types of nudges (defaults, sorting, and choice overload), and several consumer 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.