Experience in Financial Decision-Making
Fifty-three percent of subjects who owned a high-fee account with a local bank in Malawi did not switch to a new, lower-fee account when given the choice. In contrast, holders of high-fee accounts who had been induced to make more transactions in the past were significantly more likely to adopt the new, cheaper account. Using estimates from a structural model, we find that the different propensity to switch is better explained by differences in the valuation of the new account rather than differences in the cost of switching. Experience using financial products can thus improve financial decision making.
Main Authors: | , |
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Format: | Working Paper biblioteca |
Language: | English |
Published: |
Washington, DC: World Bank
2018-09
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Subjects: | SAVINGS, ENDOWMENT EFFECT, FIELD EXPERIMENT, SAVINGS ACCOUNTS, |
Online Access: | http://documents.worldbank.org/curated/en/815821536173881140/Endowment-Effects-and-Usage-of-Financial-Products-Field-Evidence-from-Malawi https://hdl.handle.net/10986/30421 |
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Summary: | Fifty-three percent of subjects who owned a high-fee account with a local bank in Malawi did not switch to a new, lower-fee account when given the choice. In contrast, holders of high-fee accounts who had been induced to make more transactions in the past were significantly more likely to adopt the new, cheaper account. Using estimates from a structural model, we find that the different propensity to switch is better explained by differences in the valuation of the new account rather than differences in the cost of switching. Experience using financial products can thus improve financial decision making. |
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