American Economic Review
Vol. 99, Issue 5, Pages 2085-2095
December 2009
Abstract
Consistent with mental accounting, we document that investors
sometimes choose the asset allocation for one account without
considering the asset allocation of their other accounts. The setting
is a firm that changed its 401(k) matching rules. Initially, 401(k)
enrollees chose the allocation of their own contributions, but the
firm chose the match allocation. These enrollees ignored the match
allocation when choosing their own-contribution allocation. In the
second regime, enrollees selected both accounts' allocations, leading
them to integrate the two. Own-contribution allocations before the
rule change equal the combined own- and match-contribution allocations
afterward, whereas combined allocations differ sharply across
regimes.
Citation
Choi, James J., David Laibson, and Brigitte C. Madrian. "Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect." American Economic Review 99.5 (December 2009): 2085-2095.