Abstract
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.
Highlights
People frequently need to make personal and professional decisions in their daily lives
We argue that financial decisions do not always benefit from a more deliberative process that relies on ample information
The results showed that intuitive strategies could outperform deliberation-analytic strategies for value integration, an operation that is critical in complex decisions
Summary
People frequently need to make personal and professional decisions in their daily lives. Some of these decisions can be inconsequential, others, such as financial decisions, can enormously impact individuals’ economic and social lives. These include choosing a savings plan, investing in a pension fund, and taking out a loan. The availability of investment tools and online resources enables individuals to base financial decisions on robust logical thinking and analytical analysis of all the available information. A person who wants to select a savings plan might review all the options, consult online resources, and engage in analytical evaluations of financial information. Given the glut of information swamping online resources today, economic decisions
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