Department of Management UTSC
Rotman School of Management
University of Toronto
105 St. George Street
Toronto, ON, M5S 3E6
Institutional Affiliation: University of Toronto
NBER Working Papers and Publications
|September 2018||Peer Advice on Financial Decisions: A case of the blind leading the blind?|
with B. Douglas Bernheim, Fulya Ersoy, Donna Harris: w25034
Previous research shows that many people seek financial advice from non-experts, and that peer interactions influence financial decisions. We investigate whether such influences are beneficial, harmful, or simply haphazard. In our laboratory experiment, face-to-face communication with a randomly assigned peer significantly improves the quality of private decisions, measured by subjects' ability to choose as if they properly understand their opportunity sets. Subjects do not merely mimic those who know better, but also make better private decisions in novel tasks. People with low financial competence experience greater improvements when their partners also exhibit low financial competence. Hence, peer-to-peer communication transmits financial decision-making skills most effectively when pee...
|October 2014||A Method for Evaluating the Quality of Financial Decision Making, with an Application to Financial Education|
with B. Douglas Bernheim, Annamaria Lusardi: w20618
We introduce a method for measuring the quality of financial decisions built around a notion of financial competence, which gauges the alignment between consumers choices and those they would make if they properly understood their opportunities. We prove our measure admits a formal welfare interpretation even when consumers suffer from additional decision-making flaws, known and unknown, outside the scope of analysis. An application illuminates the pitfalls of the types of brief rhetoric-laden interventions commonly used for adult financial education: they affect behavior through unintended mechanisms, and hence may not improve decisions even when they perform well according to conventional metrics.