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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Dean Karlin

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Working Papers

December 2005What's Psychology Worth? A Field Experiment in the Consumer Credit Market
with Marianne Bertrand, Sendhil Mullainathan, Eldar Shafir, Jonathan Zinman: w11892
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 significa...

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