Code for: Dominated pension investments: the role of search frictions and unawareness

Code for: Dominated pension investments: the role of search frictions and unawareness<br><br>Abstract:<br>The market for long-term saving in mutual funds is characterized by high price dispersion between similar funds. We conduct a large-scale field experiment in the Swedish pension system to examine to what extent information and search frictions can explain why savers choose dominated high-fee index funds. Three findings stand out: (i) Overall, information letters that increase awareness of a dominated choice and reduce search costs of finding the dominating alternative improve savers’ real investment choices. (ii) While the average effects are positive, there is a high degree of inertia in dominated investments. A majority of previously active investors are unresponsive to information that essentially removes search costs. The inertia holds across expected gains, rejecting models with fixed adjustment costs. (iii) We estimate that a lack of awareness and search costs account for at most 45 percent of dominated fund choices.