Decision-Making Approaches and the Propensity to Default: Evidence and Implications

Jeffrey Brown, Anne M. Farrell and Scott Weisbenner

No 20949, NBER Working Papers from National Bureau of Economic Research, Inc

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. Using a survey of plan participants, we find that procrastination and the need for cognitive closure are important determinants of the likelihood of default. We also explore 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.

JEL-codes: D03 D14 G11 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-age
Note: AG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Brown, Jeffrey R. & Farrell, Anne M. & Weisbenner, Scott J., 2016. "Decision-making approaches and the propensity to default: Evidence and implications," Journal of Financial Economics, Elsevier, vol. 121(3), pages 477-495.

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Journal Article: Decision-making approaches and the propensity to default: Evidence and implications (2016)
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