TY  - JOUR
AU  - Choi,James J.
AU  - Laibson,David
AU  - Madrian,Brigitte C.
TI  - $100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11554
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11554
L1  - http://www.nber.org/papers/w11554.pdf
N1  - Author contact info:
James J. Choi
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
E-Mail: james.choi@yale.edu

David Laibson
Department of Economics
Littauer M-12
Harvard University
Cambridge, MA 02138
Tel: 617/496-3402
Fax: 617/495-8570
E-Mail: dlaibson@gmail.com

Brigitte C. Madrian
John F. Kennedy School of Government
Harvard University
79 JFK Street
Cambridge, MA 02138
Tel: 617-495-8917
Fax: 617-496-5960
E-Mail: Brigitte_Madrian@Harvard.edu
AB  - It is typically difficult to determine whether households invest optimally. But sometimes, investment incentives are strong enough to create sharp normative restrictions. We identify employees at seven companies who are eligible to receive employer matching contributions in their 401(k) and can make penalty-free withdrawals for any reason. For these employees, contributing less than the match threshold is a dominated action that violates the no-arbitrage condition. Nevertheless, between 20% and 60% contribute below the threshold, losing as much as 6% of their annual pay. Providing employees with information about the free lunch they are foregoing fails to raise contribution rates.
ER  -