Choice overload paradox and public policy design. The case of Swedish pension system

Slawomir Czech ()
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Slawomir Czech: University of Economics in Katowice

No 44/2015, Working Papers from Institute of Economic Research

Abstract: In this paper we focus on an adverse effect of extensive choice widely known as ‘choice overload’. We draw on the case of Swedish funded pensions for illustration and analyze consequences of the design that allowed for maximizing the choice set. The analysis shows limitations of employing the rational choice approach to the real choice decisions biased with common psychological factors and demonstrates that government’s responsibility for the privatized pension system does not end with the design. We also emphasize the need for a decent default option, which would mitigate socially harmful results of adverse behavior effects like procrastination, status quo bias or abstaining from choice. After all, privatized pension systems still belong to a sphere of public policy.

Keywords: extensive choice; cognitive limitations; market failure; choice architecture; funded pensions (search for similar items in EconPapers)
JEL-codes: D19 H44 H55 (search for similar items in EconPapers)
Date: 2015-04, Revised 2015-04
New Economics Papers: this item is included in nep-age
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Persistent link: https://EconPapers.repec.org/RePEc:pes:wpaper:2015:no44

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