El Departamento de Administración de la Facultad de Economía y Negocios de la Universidad de Chile, tienen el agrado de invitarle al Seminario Académico: Searching with Inaccurate Priors in Consumer Credit Markets.
Autores: Erik Berwart, Sean Higgins, Sheisha Kulkarni, Santiago Truffa.
Expone: Santiago Truffa, Universidad de los Andes.
Abstract:
How do inaccurate priors about the distribution of interest rates affect search and outcomes in consumer credit markets? Consumer credit markets feature large amounts of within-borrower price dispersion in interest rates; if consumers are unaware of the extent of this price dispersion, they may shop less and take out loans at higher interest rates than they would otherwise. We conducted a randomized controlled trial with 112,063 loan seekers in Chile where we randomized whether we showed participants a price comparison tool that we built using administrative data from Chile’s financial regulator. The tool shows loan seekers a conditional distribution of interest rates based on similar loans obtained recently by similar borrowers, using data on the universe of consumer loans merged with borrower characteristics. We also cross-randomized whether we asked participants their priors about the distribution of interest rates. We find that consumers thought interest rates were lower than they actually were, and the price comparison tool caused them to increase their expectations about the interest rate they would obtain by 58%. Consumers also underestimated price dispersion, and our price comparison tool caused them to increase their estimates of dispersion by 80%. The price comparison tool did not cause people to search or apply at more institutions, but it did cause them to receive 12% more offers, 11% lower interest rates, and to be 5% more likely to take out a loan. In contrast, merely asking participants their expectations about interest rates led them to search at 4% more institutions and obtain 10% lower interest rates.
