New: Failure to Refinance
Households that fail to refinance their mortgage when interest rates decline can lose out on substantial savings. Based on a large random sample of outstanding U.S. mortgages in December of 2010, we estimate that approximately 20% of households for whom refinancing would be optimal and who appeared unconstrained to do so, had not taken advantage of the lower rates. We estimate the present-discounted cost to the median household who fails to refinance to be approximately $11,500, making this a particularly large consumer financial mistake. To shed light on possible mechanisms and corroborate our main findings, we also provide results from a mail campaign targeted at a sample of homeowners that could benefit from refinancing.
New: Awareness Reduces Racial Bias
Can raising awareness of racial bias subsequently reduce that bias? We address this question by exploiting the widespread media attention highlighting racial bias among professional basketball referees that occurred in May 2007 following the release of an academic study. Using new data, we confirm that racial bias persisted in the years after the study's original sample, but prior to the media coverage. Subsequent to the media coverage though, the bias completely disappeared. We examine potential mechanisms that may have produced this result and find that the most likely explanation is that upon becoming aware of their biases, individual referees changed their decision-making process. These results suggest that raising awareness of even subtle forms of bias can bring about meaningful change.
REVISION: Heuristic Thinking and Limited Attention in the Car Market
Can heuristic information processing affect important product markets? We explore whether the tendency to focus on the left-most digit of a number affects how used car buyers incorporate odometer values in their purchase decisions. Analyzing over 22 million wholesale used-car transactions, we find substantial evidence of this left-digit bias; there are large and discontinuous drops in sale prices at 10,000-mile thresholds in odometer mileage, along with smaller drops at 1,000-mile thresholds ...
REVISION: Can Losing Leads to Winning?
Can losing during a competitive task motivate individuals and teams to exert greater effort and perform better overall? Analysis of over 45,000 collegiate and 18,000 professional basketball games illustrates that being slightly behind at halftime leads to a discontinuous increase in winning percentage. Teams that are losing by a small amount win approximately 2 (NCAA) and 6 (NBA) percentage points more often than expected. In the NBA, this psychological effect is roughly half the size of the ...
New: Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience, Competition, and High Stakes
Although experimental studies have documented systematic decision errors, many leading scholars believe that experience, competition, and large stakes will reliably extinguish biases. We test for the presence of a fundamental bias, loss aversion, in a high-stakes context: professional golfers’ performance on the PGA TOUR. Golf provides a natural setting to test for loss aversion because golfers are rewarded for the total number of strokes they take during a tournament, yet each individual hole ...
New: Understanding College Application Decisions: Why College Sports Success Matters
Using a unique, national dataset that indicates where students choose to send their SAT scores, we find that college sports success has a large impact on student application decisions. For example, a school that has a stellar year in basketball or football on average receives up to 10% more SAT scores. Certain demographic groups (males, blacks, out-of-state students, and students that played sports in high school) are more likely to be influenced by sports success than their counterparts. We ...
New: The Impact of College Sports Success on the Quantity and Quality of Student Applications
Empirical studies have produced mixed results on the relationship between a school's sports success and the quantity and quality of students that apply to the school. This study uses two unique datasets to shed additional light on the indirect benefits that sports success provides to NCAA Division I schools. Key findings include: (i) football and basketball success significantly increase the quantity of applications to a school, with estimates ranging from 2-8% for the top 20 football schools ...
New: Size Matters (and so Does Experience): How Personal Experience with a Fine Influences Behavior
In this paper, we disentangle the effects of new information from the effects of personal experience to describe how personal experience changes behavior. We examine personal experience with one of the most ubiquitous managerial and policy tools: the monetary fine. We demonstrate that experience with a fine, controlling for the effect of learning new information, significantly boosts future compliance. We also show that experience with a large fine boosts compliance more than experience with a ...
New: What's in a Picture? Evidence of Discrimination from Prosper.com
We analyze discrimination in a new type of credit market known as peer-to-peer lending. Specifically, we examine how lenders in this online market respond to signals of characteristics such as race, age, and gender that are conveyed via pictures and text. We find evidence of significant racial disparities; loan listings with blacks in the attached picture are 25 to 35 percent less likely to receive funding than those of whites with similar credit profiles. Conditional on receiving a loan, ...