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Choice Architecture to Improve Financial Decision Making

Author

Listed:
  • Jeffrey Carpenter

    (Middlebury College and IZA)

  • Emiliano Huet-Vaughn

    (Pomona College)

  • Peter Hans Matthews

    (Middlebury College and Aalto University School of Business)

  • Andrea Robbett

    (Middlebury College)

  • Dustin Beckett

    (Consumer Financial Protection Bureau)

  • Julian Jamison

    (University of Exeter)

Abstract

We exploit the principles of choice architecture to evaluate interventions in the market for reloadable prepaid cards. Participants are randomized into three card menu presentation treatments—the market status quo, a regulation-inspired reform, or an enhanced reform designed to minimize attribute overload—and offered choices based on prior structural estimation of individual preferences. Consumers routinely choose incorrectly under the status quo, with tentative evidence that the regulation-inspired presentation may increase best card choice and clear evidence that the enhanced reform reduces worst card choice. Welfare analysis suggests the regulation-inspired presentation offers modest gains, while the enhanced policy generates substantial benefits.

Suggested Citation

  • Jeffrey Carpenter & Emiliano Huet-Vaughn & Peter Hans Matthews & Andrea Robbett & Dustin Beckett & Julian Jamison, 2021. "Choice Architecture to Improve Financial Decision Making," The Review of Economics and Statistics, MIT Press, vol. 103(1), pages 102-118, March.
    • Handle: RePEc:tpr:restat:v:103:y:2021:i:1:p:102-118
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    References listed on IDEAS

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    Cited by:

    1. Danz, David & Engelmann, Dirk & Kübler, Dorothea, 2022. "Do legal standards affect ethical concerns of consumers?," European Economic Review, Elsevier, vol. 144(C).
    2. Tatiana Homonoff & Rourke O'Brien & Abigail B. Sussman, 2021. "Does Knowing Your FICO Score Change Financial Behavior? Evidence from a Field Experiment with Student Loan Borrowers," The Review of Economics and Statistics, MIT Press, vol. 103(2), pages 236-250, May.

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