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

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)477-495
Number of pages19
JournalJournal of Financial Economics
Volume121
Issue number3
DOIs
StatePublished - Sep 1 2016

Fingerprint

Propensity
Decision making
Procrastination
Economics
Retirement
Individual decision making
Demographic characteristics
Closure
Responsiveness

Keywords

  • Behavioral economics
  • Decision making
  • Default options
  • Pensions
  • Retirement

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

Decision-making approaches and the propensity to default : Evidence and implications. / Brown, Jeffrey R; Farrell, Anne M.; Weisbenner, Scott J.

In: Journal of Financial Economics, Vol. 121, No. 3, 01.09.2016, p. 477-495.

Research output: Contribution to journalArticle

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