This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

What's Psychology Worth? A Field Experiment in the Consumer Credit Market

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Marianne Bertrand
Dean Karlin
Sendhil Mullainathan
Eldar Shafir
Jonathan Zinman

Additional information is available for the following registered author(s):

Abstract

Numerous laboratory studies find that minor nuances of presentation and description change behavior in ways that are inconsistent with standard economic models. How much do these context effect matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experience? We report on a field experiment designed to address this question. A South African lender sent letters offering incumbent clients large, short-term loans at randomly chosen interest rates. The letters also contained independently randomized psychological "features" that were motivated by specific types of frames and cues shown to be powerful in the lab, but which, from a normative perspective, ought to have no impact. Consistent with standard economics, the interest rate significantly affected loan take-up. Inconsistent with standard economics, some of the psychological features also significantly affected take-up. The average effect of a psychological manipulation was equivalent to a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers and persist across different income and education levels. In short, even in a market setting with large stakes and experienced customers, subtle psychological features appear to be powerful drivers of behavior. The findings pose a challenge for the social sciences: they suggest that psychological nuance matters but may be inherently difficult to predict given the impact of context. Successful incorporation of psychological features into field studies is likely to prove a vital, but nontrivial, addition to the formation of more general theories on when, why, and how frames and cues influence important decisions.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w11892.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11892.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:nbr:nberwo:11892

Note: CF LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
D1 - Microeconomics - - Household Behavior
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation And The Propensity To Plan," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1007-1047, August. [Downloadable!] (restricted)
    Other versions:
  3. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December. [Downloadable!] (restricted)
  4. Stefano Della Vigna & Ulrike Malmendier, 2004. "Contract Design and Self-control: Theory and Evidence," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 353-402, May. [Downloadable!] (restricted)
  5. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October. [Downloadable!] (restricted)
  6. Michael S. Haigh & John A. List, 2005. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Journal of Finance, American Finance Association, vol. 60(1), pages 523-534, 02. [Downloadable!] (restricted)
    Other versions:
  7. Mandel, Naomi & Johnson, Eric J, 2002. " When Web Pages Influence Choice: Effects of Visual Primes on Experts and Novices," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 29(2), pages 235-45, September.
  8. Fehr, Ernst & Götte, Lorenz, 2004. "Do Workers Work More When Wages Are High? Evidence from a Randomized Field Experiment," IZA Discussion Papers 1002, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February. [Downloadable!] (restricted)
  10. Morwitz, Vicki G & Johnson, Eric J & Schmittlein, David C, 1993. " Does Measuring Intent Change Behavior?," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 20(1), pages 46-61, June.
  11. Dean S. Karlan & Jonathan Zinman, 2005. "Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Experiment," Working Papers 911, Economic Growth Center, Yale University. [Downloadable!]
    Other versions:
  12. John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Framed Field Experiments 0047, The Field Experiments Website. [Downloadable!]
    Other versions:
  13. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May. [Downloadable!]
  14. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter. [Downloadable!] (restricted)
  15. Fitzsimons, Gavan J & Shiv, Baba, 2001. " Nonconscious and Contaminative Effects of Hypothetical Questions on Subsequent Decision Making," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 28(2), pages 224-38, September.
  16. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2006. "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 747-782, May. [Downloadable!] (restricted)
    Other versions:
  17. Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  18. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  19. Dean Karlan & Jonathan Zinman, 2005. "Elasticities of Demand for Consumer Credit," Working Papers 926, Economic Growth Center, Yale University. [Downloadable!]
  20. Min Ding & Grewal Rajdeep & John Liechty, 2005. "Incentive-aligned Conjoint Analysis," Framed Field Experiments 0018, The Field Experiments Website. [Downloadable!]
  21. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 635-672, May. [Downloadable!] (restricted)
    Other versions:
  22. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November. [Downloadable!] (restricted)
  23. David Laibson, 2001. "A Cue-Theory Of Consumption," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 81-119, February. [Downloadable!] (restricted)
  24. Ganzach, Yoav & Karsahi, Nili, 1995. "Message framing and buying behavior: A field experiment," Journal of Business Research, Elsevier, vol. 32(1), pages 11-17, January. [Downloadable!] (restricted)
  25. Sewin Chan & Ann Huff Stevens, 2003. "What You Don't Know Can't Help You: Pension Knowledge and Retirement Decision Making," NBER Working Papers 10185, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  26. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February. [Downloadable!] (restricted)
  27. Markus M. Mobius & Tanya S. Rosenblat, 2006. "Why Beauty Matters," American Economic Review, American Economic Association, vol. 96(1), pages 222-235, March. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maria Salgano, 2006. "Choosing to Have Less Choice," Working Papers 2006.37, Fondazione Eni Enrico Mattei. [Downloadable!]
  2. Dean Karlan & Jonathan Zinman, 2007. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," Working Papers 956, Economic Growth Center, Yale University. [Downloadable!]
    Other versions:
  3. Monika Bütler & Michel André Maréchal, 2007. "Framing Effects in Political Decision Making: Evidence From a Natural Voting Experiment," University of St. Gallen Department of Economics working paper series 2007 2007-04, Department of Economics, University of St. Gallen. [Downloadable!]
    Other versions:
  4. Pablo Brañas-Garza, 2006. "Promoting Helping Behavior with Framing in Dictator games," ThE Papers 06/04, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
    Other versions:
  5. Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2006. "The Effect Of An Additional Alternative On Measured Risk Preferences In A Laboratory Experiment In Peru," Departmental Working Papers 2006-10, McGill University, Department of Economics. [Downloadable!]
    Other versions:
  6. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2007. "The Age of Reason: Financial Decisions Over the Lifecycle," NBER Working Papers 13191, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Karlan, Dean S. & Zinman, Jonathan, 2007. "Credit Elasticities in Less-Developed Economies: Implications for Microfinance," CEPR Discussion Papers 6071, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Dean Karlan & Jonathan Zinman, 2005. "Elasticities of Demand for Consumer Credit," Working Papers 926, Economic Growth Center, Yale University. [Downloadable!]
  9. Craig Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2005. "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," NBER Working Papers 11611, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006. "Coarse Thinking and Persuasion," NBER Working Papers 12720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Beck, Thorsten & de la Torre, Augusto, 2006. "The basic analytics of access to financial services," Policy Research Working Paper Series 4026, The World Bank. [Downloadable!]
  12. Sumit Agarwal & Brent W. Ambrose, 2008. "Does it pay to read your junk mail? evidence of the effect of advertising on home equity credit choices," Working Paper Series WP-08-09, Federal Reserve Bank of Chicago. [Downloadable!]
  13. Jonathan Zinman, 2005. "Debit or credit?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston. [Downloadable!]
  14. Burman, L.E. & Coe, N.B. & Dworsky, M. & Gale, W.G., 2008. "Effects of Public Policies on the Disposition of Pre-retirement Lump-Sum Distributions: Rational and Behavioral Influences," Discussion Paper 2008-94, Tilburg University, Center for Economic Research. [Downloadable!]
  15. Saez, Emmanuel, 2007. "Details Matter: The Impact of Presentation and Information on the Take-up of Financial Incentives for Retirement Saving," CEPR Discussion Papers 6386, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  16. Steven D. Levitt & John A. List, 2008. "Field Experiments in Economics: The Past, The Present, and The Future," NBER Working Papers 14356, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Jason T. Abaluck & Jonathan Gruber, 2009. "Choice Inconsistencies Among the Elderly: Evidence from Plan Choice in the Medicare Part D Program," NBER Working Papers 14759, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Alberto F. Alesina & Francesca Lotti & Paolo Emilio Mistrulli, 2008. "Do Women Pay More for Credit? Evidence from Italy," NBER Working Papers 14202, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Karlan, Dean & List, John, 2006. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," Working Papers 13, Yale University, Department of Economics. [Downloadable!]
    Other versions:
  20. Nava Ashraf & James Berry & Jesse M. Shapiro, 2007. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia," NBER Working Papers 13247, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2005. "The Effect of an Additional Alternative on Measured Risk Preferences in a Field Experiment," Experimental 0511003, EconWPA. [Downloadable!]
Statistics
Access and download statistics

Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.

This page was last updated on 2009-11-7.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.