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« Back to Results

Behavioral Economics in the Field

Paper Session

Sunday, Jan. 7, 2018 1:00 PM - 3:00 PM

Marriott Philadelphia Downtown, Meeting Room 308
Hosted By: American Economic Association
  • Chair: Devin Pope, University of Chicago

How Do Individuals Repay Their Debt? The Balance-Matching Heuristic

John Gathergood
,
University of Nottingham
Neale Mahoney
,
University of Chicago
Neil Stewart
,
University of Warwick
Jorg Weber
,
University of Nottingham

Abstract

We study how individuals repay their debt using linked data on multiple credit cards from five major issuers. We find that individuals do not allocate repayments to the higher interest rate card, which would minimize the cost of borrowing. Instead, individuals allocate repayments using a balance-matching heuristic under which the share of repayments on each card is matched to the share of balances on each card. We show that balance matching captures more than half of the predictable variation in repayments, performs substantially better than other models, and is highly persistent within individuals over time. Consistent with these findings, we show that machine learning algorithms attribute the greatest variable importance to balances and the least variable importance to interest rates in predicting repayment behavior.

How Much Does Your Boss Make? The Effects of Salary Comparisons

Ricardo Perez-Truglia
,
University of California-Los Angeles
Zoe Cullen
,
Harvard Business School

Abstract

We study how employees learn about the salaries of their peers and managers, and how those beliefs affect their behavior. We conducted a field experiment with a sample of 2,000 employees from a multi-billion-dollar corporation. We combine rich data from surveys and administrative records with an experiment that provided some employees with accurate information about the salaries of others. First, we document large misperceptions about salaries and identify some of the sources of these misperceptions. Second, we find significant behavioral elasticities with respect to the perceived salaries of other employees. These effects are different for horizontal and vertical comparisons: while higher perceived peer salary decreases effort, output and retention, higher perceived manager salary has a positive effect on those same outcomes. We discuss evidence on the underlying mechanisms, and implications for pay inequality and pay transparency.

Changes in Nutrient Intake at Retirement

Melvin Stephens Jr.
,
University of Michigan
Desmond Toohey
,
University of Delaware

Abstract

While the literature finding a decrease in food expenditures at retirement suggests households do not adequately save for retirement, subsequent evidence that nutrient intake is unaffected by retirement tempers these concerns. Both pooling corss-sectional datasets spanning more than forty years and using longitudinal data, we find that nutrient intake falls at retirement. Improvements in dietary intake data collection methods, which reduced survey non-response and increased reported dietary intake, can reconcile the differences between our results and previous findings.

Intertemporal Choice Experiments and Large Stakes Behavior

Diego Aycinena
,
Del Rosario University
Szabolcs Blazsek
,
Francisco Marroquín University
Lucas Rentschler
,
Utah State University
Charles Sprenger
,
University of California-San Diego

Abstract

If experimental choices are reflective of time preferences and diminishing marginal utility,then they should meaningfully predict such large stakes smoothing decisions. In a sample of around 450 Guatemalan conditional cash transfer recipients, we find that preferences for smooth payment plans are closely predicted at both the aggregate and individual level by
experimental measures of diminishing marginal utility and patience. These represent the first findings on the predictive content of experimentally elicited intertemporal preferences for large stakes decisions.
Discussant(s)
James Choi
,
Yale University
Gautam Rao
,
Harvard University
Peter Ganong
,
University of Chicago
Michaela Pagel
,
Columbia University
JEL Classifications
  • D1 - Household Behavior and Family Economics