Information Architecture and Intertemporal Choice: A Randomized Field Experiment in the United States

Abstract

Professor Ivo Welch, ChairIn a randomized field experiment, I show that information architecture significantly affects individuals' spending and savings behavior. I present users of a large online account aggregation provider with a personalized financial index. This index represents the inflation-protected, lifetime monthly cash flow that they can obtain, given their personal financial and demographic information and current market prices. Users receiving this information tool reduce their spending by 10.7% relative to a control group. This effect is sensitive to the description of the index using a consumption frame rather than an investment frame and to the presentation of an explicit comparison between the index and historical spending levels. Further, spending reductions are primarily in large, infrequent transactions. This experiment is the first to directly affect overall spending behavior and to demonstrate the importance of information architecture in that context. It demonstrates the potential of low cost digital information tools to impact financial behavior on a large scale.ii The dissertation of Yaron Levi is approved.

The Financial Health and The Usage of Financial Technology among Young Adults

“…Many other researchers highlight the positive usage of fintech. Stango and Zinman (2014) document that individuals respond to surveys about overdrafts by paying greater attention to account balances and incurring fewer fees; Levi (2015) shows that individuals respond to information about their net worth by increasing their savings in certain conditions and Medina (2016) finds that reminders for timely payment reduce the credit card late fees that are paid.…”

Behaviorally informed policies for household financial decisionmaking

“…Interventions that might be appropriate include providing employees who are nearing retirement with preference checklists that summarize the reasons for and against purchasing an annuity, as well as incorporating in their quarterly statements information on how much monthly retirement income their savings will generate. [71][72][73] It may also make sense to frame the decision in ways that highlight the potential value of having annuity income to supplement Social Security. The government could, for instance, emphasize the value of an annuity in ensuring that individuals do not outlive their financial resources while de-emphasizing how long an individual would need to live to get a positive return.…”

Behaviorally Informed Policies for Household Financial Decisionmaking

“…Interventions that might be appropriate include providing employees who are nearing retirement with preference checklists that summarize the reasons for and against purchasing an annuity, as well as incorporating in their quarterly statements information on how much monthly retirement income their savings will generate. [71][72][73] It may also make sense to frame the decision in ways that highlight the potential value of having annuity income to supplement Social Security. The government could, for instance, emphasize the value of an annuity in ensuring that individuals do not outlive their financial resources while de-emphasizing how long an individual would need to live to get a positive return.…”