Financial Literacy Seminar Series

November 2, 2018

3:30 PM - 5:00 PM

Seminar IV | Complexity, Financial Decision Making, and Consequence Messaging

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Arie Kapteyn, Distinguished Financial Literacy Speaker

Professor of Economics and Director, Center for Economic and Social Research, University of Southern California

Financial Literacy Seminar with Arie Kapteyn


George Washington University School of Business
Duquès Hall, Minerva
2201 G Street NW
(main entrance on 22nd Street between G and H Streets)

Bio: Arie Kapteyn

Arie Kapteyn Ph.D., is a Professor of Economics and the Executive Director of the Dornsife College of Letters Arts and Sciences Center for Economic and Social Research (CESR) at the University of Southern California. Before founding CESR at USC in 2013, Prof. Kapteyn was a Senior Economist and Director of the Labor & Population division of the RAND Corporation.

Much of Prof. Kapteyn’s recent applied work is in the field of aging and economic decision making, with papers on topics related to retirement, consumption and savings, pensions and Social Security, disability, economic well-being of the elderly, and portfolio choice. He is a pioneer in the development of new methods of data collection, using the Internet and mobile devices.

He has about 20 years of experience in recruiting and running population representative Internet panels, including the CentERpanel (2000 respondents; the first probability Internet panel in the world) and LISS panel (7500 respondents) in the Netherlands, as well as the American Life Panel (6000 respondents) and the Understanding America Study (4000 respondents currently, but growing to 6000 by early Fall 2016) in the US. He has conducted numerous experiments with the panels, concerning methods (e.g. optimal recruiting and survey design), substantive studies (including health and decision making), and measurement (self-administered biomarkers, physical activity, time use, weight and impedance measurement using advanced bathroom scales). Furthermore, he has been involved in telephone and in-person surveys on various continents.

Dr. Kapteyn received an M.A. in econometrics from Erasmus University Rotterdam, an MA in agricultural economics from Wageningen University, and a Ph.D. from Leiden University, all in the Netherlands. He is a fellow of the Econometric Society and holds a knighthood in the order of the Netherlands Lion.

Paper 1 Abstract

This paper examines two behavioral factors that diminish people’s ability to value a lifetime income stream or annuity, drawing on a survey of about 4,000 adults in a U.S. nationally representative sample. Our first main finding is that experimentally increasing the complexity of the annuity choice reduces respondents’ ability to value the annuity. We measure lack of ability to value an annuity by the difference between the sell and buy values people assign to the annuity. Our second main result is that people’s ability to value an annuity increases when we experimentally induce them to think jointly about the annuitization decision and about the decision of how quickly or slowly to spend down assets in retirement. Accordingly, we conclude that narrow choice bracketing is an impediment to annuitization, yet the impediment can be lessened with a relatively straightforward intervention.

Paper 2 Abstract

In this paper, we developed and evaluated “consequence messaging,” a behaviorally motivated communication strategy in which we used vignettes – video and written stories about hypothetical people – to explain the consequences of decisions. We studied two related areas where consequence messaging may improve understanding and decision-making: valuing annuities and Social Security claiming decisions. We evaluated the impact of consequence messaging by conducting a small-scale online study on a representative sample of about 650 Americans ages 50-60. We randomly assigned respondents to no vignette, a video vignette or a written vignette. Then, we assessed the impact on understanding and decision-making through a survey. We assessed understanding by asking factual questions, and assessed decision-making by asking respondents to provide advice to a hypothetical person facing various decisions about annuities and Social Security claiming. The vignettes improved understanding and decision-making for both valuing annuities and Social Security claiming decisions. The effect sizes were not significantly different across written vignettes versus video vignettes. The vignettes did not have a statistically significant effect on how respondents rated the importance of concerns related to retirement.