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Choi, James J.,
David Laibson, and
Brigitte C. Madrian. 2009. "Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect."
,
99(5): 2085-95.
Show Article Details
DOI: 10.1257/aer.99.5.2085
Abstract:Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, 401(k) enrollees chose the allocation of their own contributions, but the firm chose the match allocation. These enrollees ignored the match allocation when choosing their own-contribution allocation. In the second regime, enrollees selected both accounts' allocations, leading them to integrate the two. Own-contribution allocations before the rule change equal the combined own- and match-contribution allocations afterward, whereas combined allocations differ sharply across regimes. (JEL G11, J32)
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Appendix
Authors:
Choi, James J. (Yale U)
Laibson, David (Harvard U)
Madrian, Brigitte C. (Harvard U)
JEL Classifications:
G11: Portfolio Choice; Investment Decisions
J32: Nonwage Labor Costs and Benefits; Private Pensions
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