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Overconfidence, underconfidence and the use of persuasive messages in the attainment of savings goals
Initial registration date
January 26, 2015
June 21, 2015 4:45 PM EDT
University of Mannheim
Other Primary Investigator(s)
University of Mannheim
University of Mannheim
University of Mannheim
Additional Trial Information
This research addresses the problem of overconfidence about the future ability to attain goals with persuasive messages. It is carried out in the context of attaining savings goals. We argue that savers underestimate their future ability to save and hence save too little, or stop saving altogether, in the future because savings goals at present are chosen with overconfidence. We argue that persuasive messages given at the time when a goal is made can help overconfident individuals who overestimate their own ability to reach the goals, i.e. we hypothesize that persuading savers to make more realistic savings goals at the time they formulate them will help them reach their savings goals with a higher likelihood. However, depending on the behavioral bias there may also be savers who are underconfident, i.e. individuals who underestimate their savings potential. These savers might be helped with a persuasive message encouraging them to be more ambitious with their savings goals. For the trial, we assign moneyboxes in combination with persuasive messages to current and former clients of a microfinance institution. The persuasive messages are delivered at the time clients formulate their savings goals.
Avdeenko, Alexandra et al. 2015. "Overconfidence, underconfidence and the use of persuasive messages in the attainment of savings goals." AEA RCT Registry. June 21.
In partnership with a local microfinance organization and a local university, we distribute a simple savings technology - a moneybox - to smallholder farmers in northern Ethiopia. The handing out of the boxes is embedded in the answering of a survey questionnaire during private household visits. This allows for a clean implementation of the experimental design.
In the process of handing out the moneyboxes, we randomize five messages right after farmers formulate a savings goal for which they want to save with the moneybox. Four of the five messages are persuasive in the sense that they recommend households to save for higher or lower amounts than initially formulated. After receiving the message, farmers can voluntarily adjust their savings goal with respect to the savings amount.
The fifth message does not contain a recommendation. Furthermore, we cross-randomize the recommendation to save in a daily or a weekly frequency towards the savings goal. In addition, there is a pure control group receiving neither moneyboxes nor messages. In a nutshell, the experimental procedure follows the following steps:
1. We ask respondents to name and explain the most important savings goal they would like to save for.
2. We ask respondents how much they want to save for this goal in the next 8-24 weeks (2-6 months).
3. Depending on the treatment arm (and holding the time period fixed), we read out one of these sentences:
Our experience shows that people are more likely to reach their savings goal if they have higher goal amounts. Do you want to increase the amount of your savings goal to... [Calculate goalamount*1.4]?
Our experience shows that people are more likely to reach their savings goal if they have higher goal amounts. Do you want to increase the amount of your savings goal to... [Calculate goalamount*1.2]?
Our experience shows that people are likely to reach their savings goal. [No change in goalamount]
Our experience shows that people are more likely to reach their savings goal if they have lower goal amounts. Do you want to decrease the amount of your savings goal to... [Calculate goalamount*0.8]?
Our experience shows that people are more likely to reach their savings goal if they have lower goal amounts. Do you want to decrease the amount of your savings goal to... [Calculate goalamount*0.6]?
4. Given the persuasive message, we asked participants whether they want to adjust their goal amount.
5. Depending on the treatment arm, we recommend to save either in weekly or daily intervals.
6. Then we asked participants to write down the following information on the label of the moneybox: The savings goal (written or drawn), the goal amount in Birr (considering the adjustment after the persuasive message), the savings installment in Birr, whether the savings frequency is weekly or daily and the end date. The goal amount will serve as a reference points for respondents for their savings activities. It was announced that there will be another visit at an unspecified future date.
Intervention Start Date
Intervention End Date
Primary Outcomes (end points)
Persuasion, monetary savings, goal attainment, non-monetary savings, investment, consumption expenditures, remittances and other transfers
Primary Outcomes (explanation)
Persuasion: adjustment of savings goal amount to recommendation.
Monetary savings: total cash savings, bank account savings as well as savings held with Iddir, a funeral society, and Equb, a savings club. For treated households this indicator also includes the savings held in the moneybox.
Goal attainment: difference between (new) goal amount and actual savings.
Non-monetary savings: construction materials for housing.
Investment: agricultural investment.
Consumption expenditures: Food and non-food expenditures.
Assets: Household assets.
Remittances and other transfers.
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Our study covers households from 94 village clusters in remote areas in northern Ethiopia. This basically creates a census of the zone in which the RCT is conducted. Zone is third highest level of administration of the country, subordinate to region and national level. In each cluster 10 households were randomly sampled from client lists held at the branches of the local microfinance institution. The client list comprises current and former clients from the local microfinance institution.
Treatments are randomly assigned with respect to balance the Mahalanobis distances in baseline covariates. The 940 households were randomly assigned to either control or to one of twenty different treatment arms, such that 300 observations were assigned to control and 32 observations to each treatment arm. Thereafter the Mahalanobis distance with respect to the baseline covariates given below was calculated. Mahalanobis distance was calculated pairwise between any two treatment arms and also for each treatment arm relative to control. The random assignment was only accepted if the maximum distance to control was smaller than 0.605 and the maximum distance between any of the treatment arms was smaller than 1.322. These numbers corresponded to the 0.01 percentile of the empirical distribution of these distances.
The baseline covariates used to collect Mahalanobis balance were current savings in cash (amount in Birr), current savings with the local microfinance institution (amount in Birr), whether household is a member of an Iddir, a funeral insurance, or Equb, savings group (both binary indicators), the demographic composition of the household (measured by the number of household members between 0-5, 6-11, 11-17, 18-65 and more than 65 years of age), whether the household head is female or married (both binary indicators), the years of education of the head, the total land area under cultivation (in hectare), the total revenues from crop sales (in Birr) and the per-capita consumption expenditures (in Birr)). The treatments in the study were assigned according to the first random assignment vector that passed the balance thresholds.
Experimental Design Details
Randomization was done with a computer using Gauss and Stata.
Was the treatment clustered?
Sample size: planned number of clusters
Sample size: planned number of observations
Sample size (or number of clusters) by treatment arms
Recommendation plus: 256 households
No recommendation: 128 households. Recommendation minus: 256 households
Recommendation plus 40 percent: 128 households
Recommendation plus 20 percent: 128 households
No recommendation: 128 households. Recommendation minus 20 percent: 128 households
Recommendation minus 40 percent: 128 households
Recommendation to save daily: 320 households
Recommendation to save weekly: 320 households
Pure control group: 300 households
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
INSTITUTIONAL REVIEW BOARDS (IRBs)
Post Trial Information
Is the intervention completed?
Is data collection complete?