Confidence Without Competence: Online Financial Search and Consumer Financial Decision-Making

Abstract

Consumers increasingly turn to the Internet for information prior to making important decisions. Recent research shows that consumers often misattribute online search results to their own memories, and believe they already knew what they actually just found. The present research, however, is the first to investigate how this “Google Effect” may affect confidence in subsequent decisions. This work focuses on the substantively important domain of consumer financial decision-making—a domain in which confidence is key, and the Internet has recently become the primary source of information for the plurality of consumers. Four experiments (total n = 1,604) indicate that using Google to access financial information elevates financial confidence and increases financial risk-taking, even when it does not improve relevant financial knowledge or performance. A fifth study using data from the 2016 Survey of Consumer Finances (n = 6,248) provides evidence that increased reliance on the Internet for financial information is associated with increased willingness to take financial risk in a large-scale national sample. Taken together, these studies suggest that relying on the Internet for information may shape decision making in consequential domains by elevating confidence without necessarily improving competence.

Keywords: Consumer financial decision-making, investment risk, subjective knowledge, confidence, Internet, information search