Decision-Making Approaches and the Propensity to Default: Evidence and Implications
43 Pages Posted: 16 Feb 2015 Last revised: 29 Sep 2022
Date Written: February 2015
This paper examines heterogeneity in the responsiveness to default options in a large state retirement plan, focusing on individuals’ decision-making approaches as well as their economic and demographic characteristics. Using a survey of plan participants, we find that procrastination and the need for cognitive closure are important determinants of the likelihood of default. We also explore an important implication of defaulting – individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan. The desire to change plans is also correlated with numerous economic and decision-making characteristics, including procrastination.
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