The nudging role of behavioral economics in retirement savings decisions: Current situation and future prospects

Liu, Huan; Sui, Xiaoyang; Huang, Yuan‐Na; Lin, Rong-Ping; Xu, Ming‐Xing

doi:10.3724/sp.j.1042.2019.00418

Cited by 4 publications

(10 citation statements)

References 22 publications

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“…They believed such phenomenon is also attributed to the excessive risk aversion generating from people's loss aversion. Similarly, the phenomenon of high saving ratio and low level of wealth diversification in China is also deemed to be caused by people's loss aversion [18].…”

Section: Examining Seut and Prospect Theory With Real-life Casesmentioning

confidence: 99%

A Critical Comparison of SEUT and Prospect Theory

Fan

2024

AEMPS

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This article explores two key theories in behavioral finance: Subjective Expected Utility Theory (SEUT) and Prospect Theory, outlining their development as responses to historic economic paradoxes, challenging traditional notions of rationality in economic decision-making. SEUT extends the concepts of expected value and rational choice, incorporating individual utility functions and subjective probabilities. Despite its comprehensive approach, SEUT struggles to explain certain behaviors under risk and uncertainty. Prospect Theory, conceived by Kahneman and Tversky, offers an alternative. It introduces decision weighting, focusing on how individuals differently perceive gains and losses relative to a reference point. This theory explains human biases like loss aversion and framing effects, which SEUT overlooks. Through practical examples and empirical studies, the article demonstrates scenarios where human behavior deviates from SEUT predictions, influenced by psychological factors. However, both theories provide insights into economic decision-making, they have their respective strengths and limitations. The article suggests a more integrated approach, recognizing the complexities of human decision-making in economic contexts.

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Section: Examining Seut and Prospect Theory With Real-life Casesmentioning

confidence: 99%

A Critical Comparison of SEUT and Prospect Theory

Fan

2024

AEMPS

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“…Save more tomorrow links higher savings rates with higher salaries to reduce loss aversion. In other words, transforming "paid pension with salary already received" into "pension paid with future salary increase" reduces the number of lost trips, resulting in a one-loss in the future and reducing people's loss avoidance [8]. It should be noted that the number of ways refers to the number of times the same possession (such as money) passes through the owner between the initial state and the final state.…”

Section: Loss Aversion and Save More Tomorrowmentioning

confidence: 99%

“…People may experience stronger loss aversion when they think about their retirement savings as a separate account that is distinct from their regular income. Figure 2 is adapted from scholars' research on the role of behavioral economics in boosting retirement savings [8]. As shown in Figure 2, a salary undergoes a process from scratch, which is equivalent to a journey.…”

Section: Loss Aversion and Save More Tomorrowmentioning

confidence: 99%

Measures to Encourage Retirement Savings in China The Role of Loss Aversion

Sun

2023

AEMPS

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As the aging of population and the lack of sufficient funds for a comfortable retirement life, saving for retirement is becoming increasingly important. Peoples decisions about retirement savings are influenced by cognitive biases and heuristics, such as loss aversion. This paper examines the impact of loss aversion on pension savings in China. Chinas pension reserves are slightly insufficient, and defined-benefit schemes put pressure on the government and fail to enable people to maintain their original standard of living after retirement. Therefore, this paper proposes the inclusion of save more tomorrow and annuities to address these problems. This paper also suggests simplifying the process of increasing pension savings, choosing an appropriate retirement savings rate, and diversifying investment portfolios. It highlights the need for individuals and policymakers to plan and prepare for demographic change and the impact of loss aversion on retirement savings. Recommendations are made to improve retirement savings to ensure a secure and sustainable future for all.

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“…To facilitate the readers' improved understanding of the basic premise of the uneven route, we illustrate an example (Figure 2) by utilizing the account. Note that the implicit reason that Thaler and Benartzi (2004) successfully made loss aversion disappear in the SMarT program (i.e., accumulating retirement savings with future increased salary rather than with earned salary) is that they manipulated or changed "two-route loss" to "one-route loss" (see Liu et al, 2019; Figure 2).…”

Section: Indirect Contributors To Loss Aversion: a Novel Uneven Route Accountmentioning

confidence: 99%

“…Significant achievements have been obtained when applying loss aversion to real-world problems. For example, the Save More Tomorrow (SMarT) program, proposed by Richard Thaler, practically applies loss aversion analysis to increase retirement savings (Liu et al, 2019;Thaler & Benartzi, 2004). Given its high-impact influence on different areas of social science, many studies have sought to explore the underlying mechanism of loss aversion.…”

Section: Introduction 1| Loss Aversionmentioning

confidence: 99%

Reexamination of the “uneven route” account of loss aversion

Sui

Huang

et al. 2021

Behavioral Decision Making

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The "uneven route" accountpredicts how and why loss aversion appears in human behavior. The account assumes that loss aversion occurs when the routes (the number of transitions of the same possession) for losses are greater than those for gains. The present study manipulated the uneven route account and then reexamined the account by using more harsh and unfavorable experimental conditions. Results of four experiments and a mini meta-analysis consistently showed that the modal choice supporting the uneven route account was robust to variations in the experimental design to the magnitude of payoffs and to the index of measuring loss aversion.That is, loss aversion disappeared in the tax refund versus tax paid scenario compared with the win money versus lose money scenario. These results are expected to enrich the underlying mechanism of loss aversion and attract the interest of fellow researchers to conduct further research to see which account can better explain the loss aversion.

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The nudging role of behavioral economics in retirement savings decisions: Current situation and future prospects

Cited by 4 publications

References 22 publications

A Critical Comparison of SEUT and Prospect Theory

A Critical Comparison of SEUT and Prospect Theory

Measures to Encourage Retirement Savings in China The Role of Loss Aversion

Reexamination of the “uneven route” account of loss aversion

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