The Illusion of Wealth and Its Reversal

Journal of Marketing Research, Forthcoming

11 Pages Posted: 28 Jan 2014 Last revised: 1 Jun 2016

Daniel G. Goldstein

Microsoft Research New York City; London Business School

Hal Hershfield

University of California, Los Angeles (UCLA) - Marketing Area

Shlomo Benartzi

University of California at Los Angeles

Date Written: January 28, 2014

Abstract

Research on choice architecture is shaping policy around the world, touching on areas ranging from retirement economics to environmental issues. Recently, researchers and policy makers have begun paying more attention not just to choice architecture but also to information architecture, or the format in which information is presented to people. In this article, the authors investigate information architecture as it applies to consumption in retirement. Specifically, in three experiments, they examine how people react to lump sums versus equivalent streams of monthly income. Their primary question of interest is whether people exhibit more or less sensitivity to changes in retirement wealth expressed as lump sums (e.g., $100,000) or monthly equivalents (e.g., $500 per month for life). They also test whether people exhibit an "illusion of wealth," by which lump sums seem more adequate than monthly amounts in certain conditions, as well as the opposite effect, in which lump sums seem less adequate. They conclude by discussing how format-dependent perceptions of wealth can affect policy and consumers' financial decision making.

Keywords: retirement, pension, lump, sum, amount, choice, architecture, monthly, illusion, wealth

Suggested Citation

Goldstein, Daniel G. and Hershfield, Hal and Benartzi, Shlomo, The Illusion of Wealth and Its Reversal (January 28, 2014). Journal of Marketing Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2387022 or http://dx.doi.org/10.2139/ssrn.2387022

Daniel G. Goldstein

Microsoft Research New York City ( email )

641 Avenue of Americas
New York, NY 10011
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 0 20 7000 8611 (Phone)
+44 0 20 7000 8601 (Fax)

HOME PAGE: http://www.dangoldstein.com

Hal Hershfield (Contact Author)

University of California, Los Angeles (UCLA) - Marketing Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Shlomo Benartzi

University of California at Los Angeles ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9939 (Phone)
310-267-2193 (Fax)

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