USEmployees Who Formerly Wanted to Defer Part of Their Compensation

question 96

Multiple Choice

U.S.employees who formerly wanted to defer part of their compensation to a retirement plan typically had to lower their take-home pay as they "opted in" to the plan.Now companies are being encouraged to enroll their employees in the plan automatically while allowing them to choose to raise their take-home pay by "opting-out" of the plan.Under the "opt-out" rather than "opt-in" system,enrollments in retirement plans soared.This is an example of the effects of

• A) overconfidence.
• B) confirmation bias.
• C) framing.
• D) belief perseverance.

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Definitions:

Status Quo Bias

A cognitive bias favoring the existing state of affairs or the current baseline (the "status quo"), often leading to resistance against change.

Risk Aversion

A behavioral trait or tendency to avoid taking risks, preferring options that are perceived as safer or have more predictable outcomes.

Error Management Theory

A theory that suggests humans have evolved biases in judgment and decision-making processes to minimize the cost of errors in uncertain situations, favoring the less costly error.

Enthusiasm

Intense and eager enjoyment, interest, or approval.