TY - JOUR
T1 - Time Is Money
T2 - The Effect of Mode-of-Thought on Financial Decision-Making
AU - Krava, Lidor
AU - Ayal, Shahar
AU - Hochman, Guy
N1 - Publisher Copyright:
© Copyright © 2021 Krava, Ayal and Hochman.
PY - 2021/9/27
Y1 - 2021/9/27
N2 - The dual-system approach holds that deliberative decisions and in-depth evaluation processes lead people to better financial decisions. However, research identifies situations where optimal economic decisions may stem from a more intuitive decision process. In the current work, we present three experimental studies that examined how these two modes-of-thought affect financial decisions. In Study 1, deliberative processes were indeed associated with better one-shot descriptive-based financial decisions. However, Study 2 showed that when participants were asked to make repeated decisions and were required to learn from their experience, the advantage of deliberative over intuitive processes was eliminated. In addition, when participants employed intuitive processes, the quality of their financial decisions improved significantly with experience. Finally, Study 3 showed that the deliberative processing style may lose its advantage when information is not fully available. Overall, these findings suggest that deliberation may contribute to financial decision-making in one-shot decisions. However, when information is lacking, and decisions are repetitive, intuitive processes might be just as good.
AB - The dual-system approach holds that deliberative decisions and in-depth evaluation processes lead people to better financial decisions. However, research identifies situations where optimal economic decisions may stem from a more intuitive decision process. In the current work, we present three experimental studies that examined how these two modes-of-thought affect financial decisions. In Study 1, deliberative processes were indeed associated with better one-shot descriptive-based financial decisions. However, Study 2 showed that when participants were asked to make repeated decisions and were required to learn from their experience, the advantage of deliberative over intuitive processes was eliminated. In addition, when participants employed intuitive processes, the quality of their financial decisions improved significantly with experience. Finally, Study 3 showed that the deliberative processing style may lose its advantage when information is not fully available. Overall, these findings suggest that deliberation may contribute to financial decision-making in one-shot decisions. However, when information is lacking, and decisions are repetitive, intuitive processes might be just as good.
KW - decision quality
KW - dual-system
KW - information processing style
KW - time pressure
KW - utility maximizing
UR - http://www.scopus.com/inward/record.url?scp=85116877791&partnerID=8YFLogxK
U2 - 10.3389/fpsyg.2021.735823
DO - 10.3389/fpsyg.2021.735823
M3 - Article
C2 - 34646216
AN - SCOPUS:85116877791
SN - 1664-1078
VL - 12
JO - Frontiers in Psychology
JF - Frontiers in Psychology
M1 - 735823
ER -