Choice Architecture to Improve Financial Decision Making

Jeffrey P. Carpenter; Emiliano Huet-Vaughn; Peter Hans Matthews; Andrea Robbett; Dustin Beckett; Julian Jamison

doi:10.1162/rest_a_00881

Choice Architecture to Improve Financial Decision Making

Jeffrey P. Carpenter¹; Emiliano Huet-Vaughn²; Peter Hans Matthews³; Andrea Robbett⁴; Dustin Beckett⁵; Julian Jamison⁶

¹ Middlebury College and IZA · ² Pomona College · ³ Middlebury College and Aalto University School of Business · ⁴ Middlebury College · ⁵ Consumer Financial Protection Bureau · ⁶ University of Exeter

The Review of Economics and Statistics 2021 open access

We exploit the principles of choice architecture to evaluate interventions in the market for reloadable prepaid cards. Participants are randomized into three card menu presentation treatments—the market status quo, a regulation-inspired reform, or an enhanced reform designed to minimize attribute overload—and offered choices based on prior structural estimation of individual preferences. Consumers routinely choose incorrectly under the status quo, with tentative evidence that the regulation-inspired presentation may increase best card choice and clear evidence that the enhanced reform reduces worst card choice. Welfare analysis suggests the regulation-inspired presentation offers modest gains, while the enhanced policy generates substantial benefits.

DOI: 10.1162/rest_a_00881
Volume: 103 (1)
Pages: 102-118
Language: en
Export: BibTeX
Sources: openalex crossref