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We conduct a large-scale field experiment in the Swedish pension
system to examine to what extent information and search frictions
explain dominated high-fee index fund choices. Three findings
stand out: (i) Letters that increase awareness of a dominated
choice and reduce search costs of finding the dominating alternative
improve savers’ investment choices. (ii) While the average effects
are positive, a majority of investors are unresponsive to information
that essentially removes search costs. The inertia holds across
expected gains, rejecting models with fixed adjustment costs. (iii)
Lack of awareness and search costs account for at most 45 percent
of dominated choices.
