Nudges and signposts: The effect of smart defaults and pictographic risk information on retirement saving investment choices

Abstract

The authors tested two interventions to improve retirement savings investment decisions. In an incentive‐compatible experiment, 459 participants engaged in a task simulating their working life. Periodically during the simulation, participants chose between different investment options. The authors examined the effectiveness of a “nudge” by manipulating the default option and the effectiveness of a “signpost” by manipulating the display of a pictograph summarizing the expected return of each option. Participants often followed the default option, particularly when it was “smart” (i.e., became more conservative as retirement approached) and when presented together with dynamic pictographs (i.e., updated each year assuming the investment was held until retirement). Those most likely to make optimal choices (i.e., consistent with the life cycle model) were presented with a smart default or dynamic pictographs. These findings reveal how different choice architecture interventions can be used to positively influence behavior. Retirement funds and regulators can support retirement savings decisions by the provision of smart defaults and better risk information in the form of pictographs.

This way, please: Uncovering the directional effects of attribute translations on decision making

“…In particular, we found that the expression of commonly used consumption metrics in terms of highly correlated aspects, such as environmental friendliness, increased the selection of energy efficient products. This result is in line with previous research that has pointed to the positive effects of attribute translations on decision making (Camilleri, Cam & Hoffmann, 2019;Camilleri, Larrick, et al, 2019;Ungemach et al, 2018).…”

“…Specifically, we demonstrated that the directional capacities of translations are based on an attentional prioritization process that directs pre-decisional information acquisition and integration processes towards choice options that are most congruent with the concerns and objectives highlighted by translations. This finding contributes to our understanding of attribute translations as it complements previous research, which focused primarily on the behav-ioral effects of translations on decision making (Camilleri, Cam, et al, 2019;Ungemach et al, 2018). The current study is among the first to investigate the cognitive correlates of a choice architectural intervention.…”

“…First of all, our findings suggest that the translation of attributes affects decision making through the provision of supplementary information rather than contextual changes in the decision environment. As opposed to nudges, which are frequently criticized for capitalizing too powerfully on the shortcomings of human decision making, thereby restricting individuals in their actual autonomy to act upon their preferences (Hausman & Welch, 2010), attribute translations can thus be best understood as targeted, information-based decisions aids that aim to enhance individuals' decision making competencies (Camilleri, Cam, et al, 2019;Hertwig & Grüne-Yanoff, 2017). Second, our results highlight how seemingly similar translations can have different effects on the decision process as a function of their format.…”

Thriving by Design: Can Behavioral Economics and Public Policy Shape Virtuous Lives?

“…Since a choice environment is unavoidable, choice architects can organize it in a way that may change people's behavior purposefully, allowing them to decide according to what they think is right (trying to counterbalance the negative influence of our bounded rationality and the complex structure of the environment). A vegetarian default meal on a menu (Hansen et al, 2021), the default allocation of part of your salary in a retirement account (Camilleri et al, 2019), the wording in a text scheduling your vaccination explaining that it is waiting for you (Milkman et al, 2021), or a personalized email nudge to improve student homework (Smith et al, 2018) are examples of successful nudges that have influenced people's behavior increasing their wellbeing without manipulation or restricting their freedom.…”

A Bibliometric Analysis and Review of Nudge Research Using VOSviewer

“…It has been applied to various fields as a method to influence people's behavioral decisions. Examples include influencing consumers' dietary decisions [9,10], encouraging investors to implement sustainable and responsible investment decisions [11,12], promoting students' self-directed learning educational decisions [13,14], reducing social media users' misinformation sharing decisions [15][16][17], and changing individuals' pro-social behavior decisions [18][19][20].…”