Nudging in an Evolving Marketplace: How Markets Improve Their Own Choice Architecture

To illustrate how markets improve their own choice architecture, this chapter provides examples of various consumer financial products that already incorporate some form of unrecognized private nudging. Credit cards, mortgages, and other basic banking services like overdraft protection are particularly rife with examples of this. The framework helps organize and provide clarity to numerous consumer financial products in a way that challenges current regulatory practices by illuminating the beneficial order already provided by markets. This chapter examines some examples of efforts by government regulators to create regulatory nudges that have displaced the existing choice architecture to determine whether central planning of nudges tends to produce better results for consumers than those evolved by the marketplace.