Optimal Default Policies in Defined Contribution Pension Plans when Employees are Biased
Asen Ivanov ()
No 858, Working Papers from Queen Mary University of London, School of Economics and Finance
This paper analyses a model in which employees are biased in their perception of their optimal contribution rates or asset allocations in defined contribution pension plans. The optimal default is characterised as a function of the parameters. It is shown that, for some values of the parameters, forcing employees to actively decide is the optimal default policy. The total loss in the population at the optimal default policy can be non-monotone in the parameters in counterintuitive ways.
Keywords: optimal defaults; libertarian paternalism; nudging; pension plan design (search for similar items in EconPapers)
JEL-codes: D14 D91 J26 J32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-lma and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:858
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