Dominated Pension Investments: The Role of Search Frictions and Unawareness

Karin Kinnerud and Louise Lorentzon

American Economic Journal: Applied Economics, 2026, vol. 18, issue 3, 115-44

Abstract: We conduct a large-scale field experiment in the Swedish pension system to examine to what extent information and search frictions explain dominated high-fee index fund choices. Three findings standout: (i) Letters that increase awareness of a dominated choice and reduce search costs of finding the dominating alternative improve savers' investment choices. (ii) While the average effects are positive, a majority of investors are unresponsive to information that essentially removes search costs. The inertia holds across expected gains, rejecting models with fixed adjustment costs. (iii) Lack of awareness and search costs account for at most 45 percent of dominated choices.

JEL-codes: C93 D83 G23 G51 G53 J32 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/app.20240153 (application/pdf)
https://doi.org/10.3886/E215982V1 (text/html)
https://www.aeaweb.org/articles/materials/25511 (application/pdf)
https://www.aeaweb.org/articles/materials/25512 (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejapp:v:18:y:2026:i:3:p:115-44

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/app.20240153

Access Statistics for this article

American Economic Journal: Applied Economics is currently edited by Alexandre Mas

More articles in American Economic Journal: Applied Economics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().