Choice under Conflict: The Dynamics of Deferred Decision

Tversky, Amos; Shafir, Eldar

doi:10.1111/j.1467-9280.1992.tb00047.x

Cited by 786 publications

(564 citation statements)

References 6 publications

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“…We have already cited the evidence that individuals tend to defer making decisions as they become more complicated. One variant of this type of behavior is that individuals have a greater tendency to stick with the status quo (when one is available) as decisions become more complicated (Tversky and Shafir, 1992;Shafir, Simonson and Tversky, 1993;Redelmeier and Shafir, 1995;Samuelson and Zeckhauser, 1988). Thus, the default savings behavior observed under automatic enrollment is likely to result, in part, from complexity-induced procrastination.…”

Section: Explaining the Differential Savings Behavior Before And Aftementioning

confidence: 99%

“…Studies by psychologists have shown that increasing the complexity of a decision-making task leads individuals to defer making a decision, or, in the popular vernacular, to procrastinate (Tversky and Shafir, 1992;Shafir, Simonson and Tversky, 1993). There are at least two sources of complexity in making an optimal 401(k) participation decision.…”

Section: Explaining the Differential 401(k) Participation Rates Beformentioning

confidence: 99%

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The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior

2000

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In this paper, we analyze the 401(k) savings behavior of employees in a large U.S. corporation before and after an interesting change in the company 401(k) plan. Before the plan change, employees were required to affirmatively elect participation in the 401(k) plan. After the plan change, employees were automatically and immediately enrolled in the 401(k) plan unless they made a negative election to opt out of the plan. Although none of the economic features of the plan changed, this switch to automatic enrollment dramatically changed the savings behavior of employees. We have two key findings. First, 401(k) participation is significantly higher under automatic enrollment. Second, the default contribution rate and investment allocation chosen by the company under automatic enrollment has a strong influence on the savings behavior of 401(k) participants. A substantial fraction of 401(k) participants hired under automatic enrollment exhibit what we call "default" behavior--sticking to both the default contribution rate and the default fund allocation even though very few employees hired before automatic enrollment picked this particular outcome. This "default" behavior appears to result both from participant inertia and from many employees taking the default as investment advice on the part of the company. Overall, these results are consistent with the notion that large changes in savings behavior can be motivated simply by the "power of suggestion." These findings have important implications for the optimal design of 401(k) savings plans as well as for any type of Social Security reform that includes personal accounts over which individuals have some amount of control. They also shed light more generally on the importance of both economic and non-economic factors in the determination of individual savings behavior.

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Section: Explaining the Differential Savings Behavior Before And Aftementioning

confidence: 99%

Section: Explaining the Differential 401(k) Participation Rates Beformentioning

confidence: 99%

The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior

2000

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“…This is documented in a variety of settings in papers like Tversky and Shafir (1992), Iyengar and Lepper (2000), Iyengar, Huberman, and Jiang (2004), Iyengar and Kamenica (2007). 3 For example, in Iyengar and Lepper (2000) the authors present the results of a field experiment about the purchase of jams in a gourmet grocery store in California.…”

Section: Empirical Evidence and Other Explanationsmentioning

confidence: 99%

The price of flexibility: Towards a theory of Thinking Aversion

Ortoleva

2013

Journal of Economic Theory

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The goal of this paper is to model an agent who dislikes large choice sets because of the "cost of thinking" involved in choosing from them. We take as a primitive a preference relation over lotteries of menus and impose novel axioms that allow us to separately identify the genuine preference over the content of menus, and the cost of choosing from them. Using this, we formally define the notion of thinking aversion, much in line with the definitions of risk or ambiguity aversion. We represent such preference as the difference between a monotone and affine evaluation of the content of the set and an anticipated thinking cost function that assigns to each set a thinking cost. We further extend this characterization to the case of monotonicity of the genuine rank and introduce a measure of comparative thinking aversion. Finally, we propose behavioral axioms that guarantee that the cost of thinking can be represented as the sum of the cost to find the optimal choice in a set and the cost to find out which is the optimal choice. JEL classification: D81, D83, D84.

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“…Tversky and Shafir (1992) and Tversky and Simonson (1993), among others, noted the difficult choice anomaly in several experiments. In a field experiment, Iyengar and Lepper (2000) observe that the fraction of customers who buy a gourmet jam is significantly larger when customers are presented with a limited selection than with an extensive selection.…”

Section: Difficult Choice Anomalymentioning

confidence: 99%