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Complexity and asset legitimacy in retirement investment

Listed author(s):
  • Tse, Alan
  • Friesen, Lana
  • Kalaycı, Kenan

Despite their importance, many individuals do not actively manage their retirement investment accounts. We use a laboratory experiment to examine the role that complexity plays in retirement investment decisions. We find that complex fee structures significantly increase both decision errors and default option choices compared with simple fees. We also find evidence of myopic risk aversion while complexity has no effect on the risk profile of investment decisions. The complexity effect is robust to increased asset legitimacy by having subjects earn the investment money in the experiment, although earning the investment money leads to faster learning.

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File URL: http://www.sciencedirect.com/science/article/pii/S2214804315001445
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Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 60 (2016)
Issue (Month): C ()
Pages: 35-48

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Handle: RePEc:eee:soceco:v:60:y:2016:i:c:p:35-48
DOI: 10.1016/j.socec.2015.12.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

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