The authors propose that attempts to increase consumers’ objective knowledge (OK) regarding financial instruments can deter willingness to invest when such attempts diminish consumers’ subjective knowledge (SK). In four studies, the authors use different SK manipulations and investment products to show that investment decisions are influenced by SK, independent of OK. Specifically, they find that (1) willingness to pursue a risky investment increases when SK is high (vs. low) relative to a prior investment choice (Study 1); (2) willingness to enroll in a retirement saving program is enhanced by asking consumers an easy (vs. difficult) question about finance, thereby increasing SK (Study 2); (3) technically elaborating information about a mutual fund diminishes SK regarding that investment and decreases choice of that fund (Study 3); and (4) consumers invest less money in funds when missing information is made salient, holding the objective investment information constant (Study 4). Furthermore, the effects in Studies 2–4 are mediated by participants’ self-rated SK. The authors propose that effective financial education must focus not only on imparting relevant information and enhancing OK but also on promoting higher levels of SK.

Previous demonstrations of the attraction effect were limited to explicitly described attribute values (including numerically indexed attributes, such as gambles' outcomes and their likelihoods, or perceptual attributes, such as rectangles' height and width). However, in many real‐life decisions, such as the choice of a preferred grocer, people decide based on their past experience with the options' attributes (e.g., the frequency and magnitude of product discounts over time). We examine whether the attraction effect extends from description‐based to experience‐based choice between gambles. Our results demonstrate that the attraction effect exists but is less prevalent in experience‐based than in description‐based choice. This is because the dominance relationship, necessary for the attraction effect to occur, is more difficult to recognize in experience‐based choice. Yet, when dominance is recognized, people may use it to guide difficult trade‐off choices. We discuss practical implications. Copyright © 2018 John Wiley & Sons, Ltd.

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