Choice Architecture to Improve Financial Decision Making

Abstract

We exploit the principles of choice architecture to evaluate interventions in the market for reloadable prepaid cards. Participants are randomized into three card menu presentation treatments—the market status quo, a regulation-inspired reform, or an enhanced reform designed to minimize attribute overload—and offered choices based on prior structural estimation of individual preferences. Consumers routinely choose incorrectly under the status quo, with tentative evidence the regulation-inspired presentation may increase best card choice, and clear evidence the enhanced reform reduces worst card choice. Welfare analysis suggests the regulation-inspired presentation offers modest gains, while the enhanced policy generates substantial benefits.

Can personalized digital counseling improve consumer search for modern contraceptive methods?

“…Our paper relates to research establishing that organizing and prioritizing information for consumers, such as ranking the choices displayed to users, affects their decisions across a wide variety of applications ( 12 – 14 ), including health ( 15 , 16 ). It is further related to research in behavioral science as applied to decision-making contexts in health and elsewhere, in particular, the key role of choice architecture ( 17 , 18 ). Although we do not fully attempt to distinguish between them, there are several possibilities for how SDM could influence and potentially improve outcomes along these lines: as a simple nudge, increasing the salience of one option; as a personalized and ranked recommendation, potentially inducing reciprocity in addition to higher expected benefits from continued search for a method; or as the suggestion of a trusted professional authority.…”