About
I am an experimental economist working in finance. My research is centered on field experiments in household and corporate finance and extends to macroeconomics and behavioral economics.
My representative contributions involve collaborations with financial institutions to implement large-scale randomized control trials.
My work in household finance replicates government policy programs to better understand how households respond (e.g., consume and default) to such programs. My work in corporate finance focuses on and aims to understand better the nature of frictions that prevent efficient use of resources by firms, whether this relates to capital budgeting decisions or product pricing.
Vita
Statement
Profile
Education
Stanford University
Ph.D., Economics
London School of Economics
M.Sc., Finance and Economics
Research
Publications
When Fair Isn’t Fair:
Understanding Choice Reversals Involving Social Preferences
with J. Andreoni, B. Barton, D. Bernheim and J. Naecker
Journal of Political Economy, 2020, 128 (5)
In settings with uncertainty, tension exists between ex ante and ex post notions of fairness. Subjects in an experiment most commonly select the ex ante fair alternative ex ante and switch to the ex post fair alternative ex post. One potential explanation embraces consequentialism and construes reversals as time inconsistent. Another abandons consequentialism in favor of deontological (rule-based) ethics and thereby avoids the implication that revisions imply inconsistency. We test these explanations by examining contingent planning and the demand for commitment. Our findings suggest that the most common attitude toward fairness involves a time-consistent preference for applying a naive deontological heuristic.
Published Version
Citation
Working Paper
Supplemental Appendix
Consumption Response to Credit Expansions:
Evidence from Experimental Assignment of 45,307 Credit Lines
American Economic Review, 2022, 112 (1), Lead Article
I design a large-scale field experiment that constructs a randomized credit limit extension isolating selection, anticipation, wealth, and interest rate effects and study the impulse responses on spending, contract choice, and balance sheets. Participants borrow to spend 11 cents on the dollar in the quarter of the limit increase, with a cumulative difference of 28 cents by the third year. The effects extend to those far from the limit, those who had the new limits as available credit, and those with a meaningful buffer of liquid assets. Participants near their limits borrow and spend when limits are relaxed but put off spending and save out of constraints under the counterfactual when limits are tight. The findings provide strong support for a buffer-stock interpretation that emphasizes the importance of precautionary saving.
Published Version
Citation
Working Paper
Slides
Supplemental Appendix
Johns Hopkins Macro Comp
Working Papers
Forbearance vs. Interest Rates:
Experimental Tests of Liquidity and Strategic Default Triggers
Under Revision for the Journal of Financial Economics
I study a randomized debt relief experiment and present three findings regarding default triggers and how relief affects these triggers. First, liquidity is important but not the sole trigger of default: delinquencies are most responsive to a rate reduction despite entailing the smallest payment reduction. Second, compatible with strategic behavior, borrowers default in response to future payments independent of liquidity and accounting solvency. Third, the extent of strategic behavior reflects the extent of borrowing constraints. These findings align with models positing a single strategic default trigger shaped by constraints. I discuss implications for targeting relief and modeling interest rate pass-through.
Working Paper (February 2024)
Slides
Precautionary Debt Capacity
with O. Kim
The determinants of debt capacity are a central theme in finance and macroeconomics, yet it remains unclear why firms leave some of their debt capacity unused and whether this affects investment and growth. Textbook theory suggests that firms should not leave their debt capacity unused (Tirole, 2006). Possible explanations include a lack of investment opportunities and cash flow volatility (Fama, 1990). An ideal experiment would expand debt capacity for firms with similar characteristic, helping to disentangle these motives. In this paper, we conduct such an experiment in the field. Despite most firms having substantial unused debt capacity before the intervention, expanding capacity leads to persistent increases in borrowing, investment, and sales. Contrary to textbook theory, these effects are strongest among firms farthest from their debt limits. The evidence points to precautionary motives, as firms appear to preserve debt capacity as insurance against negative cash-flow shocks and default risk. Our findings provide a novel explanation for why financing constrains firm growth, even for firms that appear financially sound.
Working Paper (March 2025)
Purpose, Intrinsic Incentives, and Output:
a Field Experiment with Investment Advisors
with A. Thakor and R. Thakor
Can intrinsically motivating employees with an organizational purpose (that transcends profit maximization) raise employee productivity and firm profitability? We study this question through a large-scale natural field experiment with a randomized control group within a large multinational financial services firm. Our research design overcomes the usual endogeneity and reverse causality concerns that make it difficult to establish a causal relationship between organizational purpose (and other intrinsic motivators) on performance. The experiment invites 808 investment advisors via a lottery to a workshop that explains, reminds, and connects the employees to the firm’s organizational purpose. We then compare the clearly defined and individually attributable outcomes of the invited group to the 14,191 advisors in the control group, which are indistinguishable from the invited based on ten outcome variables going back four years. We track impulse responses using administrative data on the firm’s bottom line (i.e., assets under management, total profits), employee financial performance (i.e., customer acquisition, bonus eligible profits), productivity (i.e., the likelihood of meeting expectations, progression in the organizational level ladder), client satisfaction metrics, and surveys. Finally, we scrutinize several additional commonly invoked mechanisms through which the effect manifests, such as social preferences, motivation, clarity, and identity, and quantify how much the employees value working for a company with purpose (i.e., in terms of a salary equivalent).
Work in Progress
Heterogeneity and Optimal Loan Pricing
with Janis Skrastins and David Sraer
Argues that the standard risk-based cost-plus loan pricing method fails to set optimal prices because it does not account for key variations in borrowers’ demand and cost sensitivities. It uses a series of large-scale field experiments to uncover surprising heterogeneity in these sensitivities and devises a novel causal machine learning algorithm to identify essential characteristics for loan pricing.
Uniform Pricing and Capital Allocation
with Ernest Liu and Janis Skrastins
A fundamental question in finance is whether capital is allocated within a fi-
nancial institution to equalize marginal returns across divisions. Yet, numerous
sand-in-the-gears can lead to inefficiencies, while other practices may hinder the
necessary reallocation. In this paper, we develop new techniques to test for alloca-
tive efficiency and quantify the resulting profit losses. These methods use pricing
variation to identify divisional marginal returns, requiring minimal assumptions
about functional forms, sources of inefficiencies, and the extent of optimizing be-
havior. We apply these techniques to study a large bank’s internal capital mar-
kets through a field experiment that facilitates reallocation by supplying capital at
prices assigned randomly. We statistically reject efficiency, and estimate a profit
loss of 17%. Uniform pricing across divisions, while not a traditional friction and
not necessarily the root cause, emerges as the key impediment to efficiency: it pre-
vents pricing from being used as a tool for capital reallocation to address frictions
that lead to divisional underperformance. This lack of contingency in pricing has
redistributive effects: subsidizing lower-income borrowers and divisions that per-
sistently underperform expectations. We discuss implications for inequality and
policy.
Teaching
FIN 340: Capital Markets and Financial Management
Undergraduate
with Brett Green
FIN 600A: Field Experiments in Household Finance
PhD
This doctoral course will introduce students to field experiments in household finance. Experiments allow us to construct sharp counterfactuals—to estimate causal relationships and test theories that are otherwise hard to test using naturally occurring variation. I start with a broad introduction to the history and methods of field experiments. I cover the basics of experimental design, including ethics, consent, IRB approval, selection and recruitment, randomization, and power calculation. I will review key issues in estimation and causal inference, recapping instrumental variables estimation of treatment effects. We will then discuss some recent experimental design examples, focusing on consumption, saving, borrowing, time/risk preferences. I will also talk about the implementation process of my projects and share other institutional advice. To conclude, the students will form groups and propose a research design in a context they choose or I assign.