Shlomo Benartzi's research while affiliated with University of California, Los Angeles and other places

Publications (53)

Article
We conducted a field experiment to study the effect of framing future moments in time as new beginnings (or “fresh starts”). University employees (N = 6,082) received mailings with an opportunity to choose between increasing their contributions to a savings plan immediately or at a specified future time point. Framing the future time point in relat...
Article
This study explores whether framing savings in more or less granular formats can increase sign-ups for a recurring deposit program in a FinTech environment.
Chapter
This book presents the definitive exposition of ‘prospect theory’, a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tvers...
Article
Full-text available
Governments are increasingly adopting behavioral science techniques for changing individual behavior in pursuit of policy objectives. The types of “nudge” interventions that governments are now adopting alter people’s decisions without coercion or significant changes to economic incentives. We calculated ratios of impact to cost for nudge intervent...
Article
Research on choice architecture is shaping policy around the world, touching on areas ranging from retirement economics to environmental issues. Recently, researchers and policy makers have begun paying more attention not just to choice architecture but also to information architecture, or the format in which information is presented to people. In...
Article
Research on choice architecture is now shaping policy around the world, touching on areas ranging from retirement economics to environmental issues. Recently, researchers and policy makers have started to pay more attention not just to choice architecture but also to information architecture: the format in which information is presented to people....
Article
In many manufacturing operations, profitable energy efficiency opportunities remain unexploited. Although previous studies have tried to explain the underinvestment, we focus on how the way in which a portfolio of opportunities is presented in a list affects adoption decisions. We use information on over 100,000 energy-saving recommendations made t...
Article
Behavioral economics can be scaled up to have a major, positive impact on certain behaviors, such as retirement savings.
Article
Full-text available
In his Nobel Prize acceptance speech given in 1985, Franco Modigliani drew attention to the "annuitization puzzle": that annuity contracts, other than pensions through group insurance, are extremely rare. Rational choice theory predicts that households will find annuities attractive at the onset of retirement because they address the risk of outliv...
Article
We analyze the long-standing “annuity puzzle” through the lens of behavioral economics. We provide novel evidence that lessens the extent of the puzzle and shed some additional light on the real drivers of the decision to annuitize. Last, we discuss the policy implications of our findings.
Article
We investigate the adoption of energy efficiency initiatives using information on over 100,000 recommendations provided to more than 13,000 small and medium sized firms under the Industrial Assessment Centers (IAC) program of the US Department of Energy (DOE). We build on an earlier study by Anderson and Newell (2004) that explored the impact of ec...
Article
Full-text available
The average nominal share prices of common stocks traded on the New York Stock Exchange have remained constant at approximately $35 per share since the Great Depression as a result of stock splits. It is surprising that U.S. firms actively maintained constant nominal prices for their shares while general prices in the economy went up more than tenf...
Article
We investigate the adoption and non-adoption of energy efficiency initiatives using a database of over 100,000 recommendations provided to more than 13,000 small and medium sized manufacturing firms. Even though the average payback across all recommendations is just over one year, many of these profitable opportunities are not implemented. Using a...
Article
Full-text available
We study the adoption and non-adoption of energy efficiency initiatives using a database of over 100,000 recommendations provided to more than 13,000 small and medium sized manufacturing firms. The recommendations run the entire gamut of operational improvements including equip-ment modification, operating procedures and management practices. Even...
Article
Full-text available
Standard economic theories of saving implicitly assume that households have the cognitive ability to solve the relevant optimization problem and the willpower to execute the optimal plan. Both of the implicit assumptions are suspect. Even among economists, few spend much time calculating a personal optimal savings rate. Instead, most people cope by...
Article
In this paper, we apply basic principles from the domain of design and architecture to choices made by employees saving for retirement. Three of the basic principles of design we apply are: (1) there is no neutral design, (2) design does matter, and (3) many of the seemingly minor design elements could matter as well. Applying these principles to t...
Article
Nominal prices of common stocks have remained constant at around $30 per share since the Great Depression as a result of firms splitting their stocks. It is surprising that firms actively maintained constant nominal price for their shares while general prices in the economy went up more than ten fold. This is especially puzzling given that commissi...
Article
Full-text available
Some 11 million participants in 401(k) plans invest more than 20 percent of their retirement savings in their employer's stock. Yet investing in the stock of one's employer is risky: single securities are riskier than diversified portfolios, and an employee's human capital typically is positively correlated with the company's performance. In the wo...
Article
Full-text available
One of the most important predictions of the dividend‐signaling hypothesis is that dividend changes are positively correlated with future changes in profitability and earnings. Contrary to this prediction, we show that, after controlling for the well‐known nonlinear patterns in the behavior of earnings, dividend changes contain no information about...
Article
Some eleven million 401(k) plan participants take a concentrated equity position in their retirement savings account, investing more than 20% of the balance in their employer's common stock. Yet investing in the stock of one's employer is a risky investment on two counts: single securities are riskier than diversified portfolios (such as mutual fun...
Article
Full-text available
As firms switch from defined-benefit plans to defined-contribution plans, employees bear more responsibility for making decisions about how much to save. The employees who fail to join the plan or who participate at a very low level appear to be saving at less than the predicted life cycle savings rates. Behavioral explanations for this behavior st...
Article
Full-text available
Investors in 401(k) plans often have very naïve notions of diversification. For example, in past research we have found that some employees use a simple "1/n rule": if there are five investment funds, they invest 20 percent in each fund regardless of its risk and return profile. 1 This strategy can lead to poor diversification if the funds in the p...
Article
There is a worldwide trend towards defined contribution savings plans, where investors are often able to select their own portfolios. How much is this freedom of choice worth? We present retirement investors with information about the distribution of outcomes they could expect to obtain from the portfolios they picked for themselves, and the same i...
Article
Full-text available
There is a worldwide trend toward defined contribution saving plans and growing interest in privatized Social Security plans. In both environments, individuals are given some responsibility to make their own asset-allocation decisions, raising concerns about how well they do at this task. This paper investigates one aspect of the task, namely diver...
Article
About a third of the assets in large retirement savings plans are invested in company stock, and about a quarter of the "discretionary" contributions are invested in company stock. From a diversification perspective, this is a dubious strategy. This paper explores the role of excessive extrapolation in employees' company stock holdings. I find that...
Article
We identify and test motives for corporate pension asset allocations using a proprietary asset allocation database covering the 1988-1994 period. We focus on the question of whether the recognition of additional minimum pension liability in accordance with SFAS No. 87 affects asset allocation. Our results are consistent with the claim that companie...
Article
Full-text available
We study how decision makers choose when faced with multiple plays of a gamble or investment. When evaluating multiple plays of a simple mixed gamble, a chance to win x or lose y, subjects show a sensitivity to the amount to lose on a single trial, holding the distribution of returns for the portfolio constant; that is, they display "myopic loss av...
Article
SFAS No. 87 (Employers' Accounting for Pensions) requires corporations to disclose the long-term expected rate of return on pension assets (ERR) and the composition of assets held in the pension portfolio. Recently, the FASB has issued SFAS No. 132 eliminating the requirement to disclose asset composition. The Board has considered the claim that, i...
Article
Many dividend theories imply that changes in dividends have information content about the future earnings of the firm. The authors investigate this implication and find only limited support for it. Firms that increase dividends in year 0 have experienced significant earnings increases in years -1 and 0, but show no subsequent unexpected earnings gr...
Article
We use pension asset allocation data to examine the relation between the expected long-term rate of return (ERR) on pension assets and the amount of funds allocated by fund managers to equity securities. If firms use their best estimate of the ERR, then cross-sectional differences in the ERR should reflect cross-sectional differences in the riskine...
Article
Full-text available
The equity premium puzzle refers to the empirical fact that stocks have outperformed bonds over the last century by a surprisingly large margin. We offer a new explanation based on two behavioral concepts. First, investors are assumed to be “loss averse,” meaning that they are distinctly more sensitive to losses than to gains. Second, even long-ter...

Citations

... Lastly, we contribute to the work on nudges (Johnson et al. 2012;Thaler and Sunstein 2008). Past work has shown the significant successes of low-cost behavioral interventions in domains such as consumer finance (Beshears et al. 2021a;Madrian and Shea 2001;Thaler and Benartzi 2004), healthcare (Beshears et al. 2021b;Milkman et al. 2021;, environmental decision-making (Larrick and Soll 2008), and legal decision-making (Fishbane, Ouss, and Shah 2020). Our work adds to this burgeoning stream of research by documenting an effective messaging nudge to motivate consumer goal pursuits, specifically for struggling consumers. ...
... Yet, not all behaviorally informed interventions are successful in every domain (Kristal and Whillans 2020), and some may even backfire (Monin and Miller 2001, Schultz et al. 2007, Sachdeva et al. 2009, Beshears et al. 2015, Damgaard and Gravert 2018, Pierce et al. 2020). On top of that, individuals often fail to anticipate what policies or interven-DellaVigna and Pope 2018, Daniels and Zlatev 2019, DellaVigna and Linos 2020, and Reiff et al. 2020. In this paper, we document the unintended effect of a behavioral intervention that both laypeople and experienced managers expect to mitigate anticipated self-serving behavior. ...
... Such goal failures are even more common in the domain of weight loss, where 83% of dieting patients gained back more weight than they lost (Mann et al. 2007;Swanson and Dinello 1970). Given the arduous process of pursuing a goal, prior research has examined numerous means to increase goal persistence, such as creating more specific goals (Scott and Nowlis 2013), increasing flexibility (Beshears et al. 2021c;Shu 2017, 2021), offering incentives and rewards for perseverance (Charness and Gneezy 2009;John et al. 2011;Sharif and Woolley 2022;Fishbach 2016, 2017), or breaking goals into smaller, more manageable subgoals (Hershfield, Shu, and Benartzi 2020;Huang, Jin, and Zhang 2017;Rai et al. working paper). ...
... Traditionally, most of the studies including Ntim (2012aNtim ( , b, 2015, Farinha (2003), Kowalewski et al. (2007), and Roy (2015) had applied pooled regression. However, According to Cameron and Trivedi (2005), pooled OLS yields biased results, since it ignores the Indicator of how profitable a company is relative to its total assets, in percentage Kowalewski et al. (2007), Grullon et al. (2003), Papo (2014), Ahmad (2019), Mitton (2004), and Asamoah (2005). Bista (2020), Roy (2015), Ullah (2014), and Jabbouri (2016) Return on Assets gives an idea as to how efficient management is at using its assets to generate earnings Calculated as: (Trailing 12M Net Income/ Average Total Assets) * 100 ...
... Decisions regarding investments involve some level of risk, since they always contain a certain degree of uncertainty regarding the probability and proportion of potential gain or loss (Levy 2016). Whereas certain stable individual differences exist in the tendency to make risky investments (Benartzi and Thaler 1993;Charness and Gneezy 2012;Eckel and Grossman 2008;Tversky and Kahneman 1992), the context in which risky decisions are made may also have an effect. Indeed, situational factors such as arousal, mood, and cognitive processes have been shown to have an impact on the way individuals make decisions related to financial investments and risk taking (Au et al. 2003;Bayer et al. 2019;De Bondt and Thaler 1995;Ifcher and Zarghamee 2011;Loewenstein et al. 2001;Tom et al. 2007;Whitney et al. 2008). 1 The cognitive processes involved in thinking and decision making are often described by dual-process theory, whereby decision makers rely on both an intuitive, heuristic-based system and a more deliberative, conscious system (Kahneman 2011). ...
... To do so, decision-making invokes a cognitive process based on inputs from the external world, interoceptive information, and assumptions of values of the person making the choice (Simon, 1977;Brown et al., 2011;Aleem et al., 2020). One can study this process from either a psychological/cognitive or normative perspective (Kahneman and Tversky, 2000). The latter often uses expected-value optimization, that is, selecting the alternative with the largest utility, perhaps considering also risk aversion (Fishburn, 2013;Schoemaker, 2013). ...
... To address this concern, future studies examining the 296 ending effect should avoid using multiples of 10 or 5 as the number of rounds or use a different 297 number of rounds as the control group (Effron et al., 2015). Another possible explanation is that 298 as the decision task continues, after several trials, people tend to beome more conservative 299 because generally people are risk aversive (Benartzi & Thaler, 1995;Larrick, 1993). This 300 possibility also demands further examination to investigate the time course of change in risky 301 decision making when no ending is perceived initially. ...
... While its magnitude appears small, the ratio of marginal fiscal benefits over costs is well above 50. This latter result is mainly due to the near-zero costs, mirroring one of the key arguments in favor of nudging (see, e.g., Benartzi et al. 2017). On aggregate, however, the fiscal benefits are relevant from the local authority's perspective. ...
... For example, one explanation for default effects is that decision-makers rationally seek to avoid 1 A large empirical literature documents the effect of defaults on behavior. Prominent examples include Madrian and Shea (2001); Johnson and Goldstein (2003); Haggag and Paci (2014); Handel (2013); Beshears et al. (2017). exerting the mental effort required to choose between non-default options. ...
... [5][6][7] One potential barrier to enrollment in Marketplace coverage is the complexity of the plan selection process. [8][9][10][11][12][13][14] Selecting a plan can be made more difficult by limited awareness of the availability of subsidies, the complexity of incomebased subsidies and contribution caps, a lack of understanding about insurance terminology (for example, deductible and copayment), the variability of plan architecture and provider networks, and administrative or time-related burdens. [15][16][17][18] These barriers can result in people remaining uninsured or choosing a suboptimal plan. ...