When “good enough” is not good enough: How maximizing benefits financial well‐being

Abstract

AbstractA maximizing decision‐making style is generally associated with lower individual well‐being. That is, even though maximizers invest more time and resources in finding the best option and achieve better outcomes than satisficers, they are still more dissatisfied with those outcomes. Contrary to this general consensus that maximizing is negatively associated with overall well‐being, across two studies we show that this decision‐making style is actually positively associated with individuals' financial well‐being. We find that measured dispositional maximizing is positively associated with financial well‐being, regardless of whether maximizing is operationalized as having high standards or the tendency to engage in alternative search (Study 1) and replicate this relationship with experimentally induced situational maximizing (Study 2). We identify financial self‐control (both measured as a trait and as the behavioral outcome of an experimental choice task) as a mediator of the aforementioned relationship. Our findings offer guidance to financial service providers and policymakers on how to improve consumers' financial well‐being, such as encouraging consumers to engage in a more meticulous search while evaluating financial products and services (e.g., home loans, retirement plans, investments) to identify the best possible option.