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Do nudges increase consumer search and switching? Evidence from financial markets

Published online by Cambridge University Press:  08 August 2022

Zita Vasas Open the ORCID record for Zita Vasas [Opens in a new window]
Zita Vasas*
Affiliation:
University of East Anglia and Centre for Competition Policy, Norwich, UK Toulouse School of Economics, Toulouse, France
*
Email: zitavasas@gmail.com
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Abstract

As nudge interventions have become more popular, academic research is developing that assesses to what extent these interventions are effective. My paper contributes to this stream of research: collating and synthesising evidence on the effectiveness of nudge interventions that aim to increase consumer search and switching in retail financial markets. Following a systematic search strategy, I identify 35 relevant papers, including qualitative studies, laboratory experiments, field experiments and ex post analyses, covering a range of retail financial products and different types of nudges. The review results in two main contributions. First, it demonstrates that different study designs serve different purposes in evidence accumulation. Second, based on over 400 estimates extracted from these papers, it establishes that the currently available evidence shows that nudges increase consumer search and switching in retail financial markets by 2–3 percentage points on average. Structural nudges that change the choice architecture more profoundly have a higher impact on search and switching than nudges that provide, simplify or highlight information. While nudge interventions may be efficient on a cost–benefit basis and can lead to a large increase in relative terms (e.g. doubling switching rates from 1% to 2%), regulators cannot expect them to significantly alter consumer behaviour.

Keywords

nudgessearchswitchingretail financial productsquantitative review
Type
New Voices
Information
Behavioural Public Policy , Volume 7 , Issue 3 , July 2023 , pp. 808 - 824
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press

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