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The Effect of Providing Peer Information on Retirement Savings Decisions

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Listed author(s):
  • John Beshears
  • James J. Choi
  • David Laibson
  • Brigitte C. Madrian
  • Katherine L. Milkman

Abstract

We conducted a field experiment in a 401(k) plan to measure the effect of disseminating information about peer behavior on savings. Low-saving employees received simplified plan enrollment or contribution increase forms. A randomized subset of forms stated the fraction of age-matched coworkers participating in the plan or age-matched participants contributing at least 6% of pay to the plan. We document an oppositional reaction: the presence of peer information decreased the savings of non-participants who were ineligible for 401(k) automatic enrollment, and higher observed peer savings rates also decreased savings. Discouragement from upward social comparisons seems to drive this reaction.

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File URL: http://www.nber.org/papers/w17345.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17345.

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Date of creation: Aug 2011
Publication status: published as JOHN BESHEARS & JAMES J. CHOI & DAVID LAIBSON & BRIGITTE C. MADRIAN & KATHERINE L. MILKMAN, 2015. "The Effect of Providing Peer Information on Retirement Savings Decisions," The Journal of Finance, vol 70(3), pages 1161-1201.
Handle: RePEc:nbr:nberwo:17345
Note: AG LS
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Find related papers by JEL classification:
  • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
  • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
  • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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