Decision-making approaches and the propensity to default: Evidence and implications

Jeffrey Brown, Anne M. Farrell and Scott Weisbenner

Journal of Financial Economics, 2016, vol. 121, issue 3, 477-495

Abstract: This paper examines heterogeneity in the responsiveness to default options in a large state retirement plan, focusing on individuals’ decision-making approaches as well as their economic and demographic characteristics. Analyses of a survey of plan participants show that procrastination and the need for cognitive closure are important determinants of the likelihood of default. This paper also explores an important implication of defaulting—individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan. The desire to change plans is also correlated with numerous economic and decision-making characteristics, including procrastination.

Keywords: Default options; Retirement; Pensions; Behavioral economics; Decision making (search for similar items in EconPapers)
JEL-codes: D03 D14 G11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Working Paper: Decision-Making Approaches and the Propensity to Default: Evidence and Implications (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:121:y:2016:i:3:p:477-495

DOI: 10.1016/j.jfineco.2016.05.010

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