Choice Architecture to Improve Financial Decision Making

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2021-03
Major/Subject
Mcode
Degree programme
Language
en
Pages
17
102-118
Series
REVIEW OF ECONOMICS AND STATISTICS, Volume 103, issue 1
Abstract
We exploit the principles of choice architecture to evaluate in-terventions in the market for reloadable prepaid cards. Participants are ran-domized into three card menu presentation treatments—the market statusquo, a regulation-inspired reform, or an enhanced reform designed to mini-mize attribute overload—and offered choices based on prior structural esti-mation of individual preferences. Consumers routinely choose incorrectlyunder the status quo, with tentative evidence that the regulation-inspiredpresentation may increase best card choice and clear evidence that the en-hanced reform reduces worst card choice. Welfare analysis suggests theregulation-inspired presentation offers modest gains, while the enhancedpolicy generates substantial benefits.
Description
Keywords
consumer finance, prepaid card, choice architecture, attribute overload, experiment, structural estimation, time preference, risk preference, convex time budget, welfare
Other note
Citation
Carpenter , J , Huet-Vaughn , E , Matthews , P , Robbett , A , Beckett , D & Jamison , J 2021 , ' Choice Architecture to Improve Financial Decision Making ' , REVIEW OF ECONOMICS AND STATISTICS , vol. 103 , no. 1 , pp. 102-118 . https://doi.org/10.1162/rest_a_00881