We are all behavioral, more or less: New consumer-level summary statistics for multiple behavioral factors

July 2018

Understanding the prevalence, diversity and predictive power of behavioral factors—deviations from classical assumptions about consumer choice—is critical for theory, research and policy.

Summary

In recent decades, research at the intersection of economics and psychology has identified a range of behavioral factors – including present-bias, failure to understand compounding and biased beliefs about asset allocation – that help explain economic decisions. While insights from behavioral research have become important inputs for economists and policymakers, two critical knowledge gaps remain: How widespread are behavioral factors and how do they affect retirement planning and outcomes? This study takes a comprehensive look at these questions, employing innovative methods to generate representative data.

Key Insights
Nearly everyone exhibits at least one behavioral indicator, and most people exhibit several.
Behavioral biases are distinct features of consumer decision-making, not proxies for unmeasured aspects of demographics or cognitive abilities.
Behavioral biases are correlated with financial well-being in ways predicted by theory and are not neutralized by market forces, learning or other factors.
Methodology

The study data come from the RAND American Life Panel (ALP), an online, nationally representative survey panel established by RAND and the University of Michigan. ALP sampling weights match the distribution of age, sex, ethnicity, and income to the Current Population Survey. In consultation with ALP staff, the researchers created six survey modules to conduct elicitations of 16 potentially behavioral factors, and 1,515 people age 18 or older responded to at least one survey question.