Institutional Affiliation: Princeton University
|Comparison Friction: Experimental Evidence from Medicare Drug Plans|
with Jeffrey R. Kling, Sendhil Mullainathan, Lee Vermeulen, Marian Wrobel: w17410
Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction--the wedge between the availability of comparative information and consumers' use of it--is inconsequential because information is readily available and consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step--p...
Published: Quarterly Journal of Economics, 127:1 (February 2012), 199-235. citation courtesy of
|What's Psychology Worth? A Field Experiment in the Consumer Credit Market|
with Marianne Bertrand, Dean Karlin, Sendhil Mullainathan, 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...