Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan
American Economic Review
vol. 108,
no. 10, October 2018
(pp. 2868-2901)
(Complimentary)
Abstract
We report on an experiment examining why default options impact behavior. By randomly assigning employees to different varieties of a salary-linked savings account, we find that default enrollment increases participation by 40 percentage points—an effect equivalent to providing a 50% matching incentive. We then use a series of experimental interventions to differentiate between explanations for the default effect, which we conclude is driven largely by present-biased preferences and the cognitive cost of thinking through different savings scenarios. Default assignment also changes employees' attitudes toward saving, and makes them more likely to actively decide to save after the study concludes.Citation
Blumenstock, Joshua, Michael Callen, and Tarek Ghani. 2018. "Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan." American Economic Review, 108 (10): 2868-2901. DOI: 10.1257/aer.20171676Additional Materials
JEL Classification
- C93 Field Experiments
- D14 Household Saving; Personal Finance
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- O12 Microeconomic Analyses of Economic Development