Choice Architecture to Improve Financial Decision Making
Carpenter, JP; Huet-Vaughn, E; Matthews, PH; et al.Robbett, A; Beckett, D; Jamison, JC
Date: 1 November 2019
Journal
Review of Economics and Statistics
Publisher
Massachusetts Institute of Technology Press (MIT Press) / Harvard University, Kennedy School of Government
Publisher DOI
Abstract
We exploit the principles of choice architecture to evaluate interventions in the
market for reloadable prepaid cards. Participants are randomized into three card
menu presentation treatments - the market status quo, a regulation-inspired reform, or an enhanced reform designed to minimize attribute overload - and offered choices based ...
We exploit the principles of choice architecture to evaluate interventions in the
market for reloadable prepaid cards. Participants are randomized into three card
menu presentation treatments - the market status quo, a regulation-inspired reform, or an enhanced reform designed to minimize attribute overload - and offered choices based on prior structural estimation of individual preferences. Consumers routinely choose incorrectly under the status quo, with tentative evidence
the regulation-inspired presentation may increase best card choice, and clear evidence the enhanced reform reduces worst card choice. Welfare analysis suggests
the regulation-inspired presentation offers modest gains, while the enhanced policy
generates substantial benefits.
Economics
Faculty of Environment, Science and Economy
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