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.

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Supplemental Appendix

Consumption Response to Credit Expansions:
Evidence from Experimental Assignment of 45,307 Credit Lines

American Economic Review, 2022, 112 (1), Lead Article

In a field experiment that constructs a randomized credit limit shock, participants borrow to spend 11 cents on the dollar in the first quarter and 28 cents by the third year. Effects extend to those far from the limit, those who had the new limits as available credit, and those with a liquid asset buffer. In the short-run, flexible and installment contracts are used in tandem, with unconstrained using installments more. Long-run borrowing is predominantly using installments. Near limits, participants borrow when credit expands but save out of constraints when limits are tight. Findings support a buffer-stock interpretation emphasizing precautionary saving.

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Slides
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Johns Hopkins Macro Comp

Working Papers

Forbearance, Interest Rates, and Present-Value Effects 
in a Randomized Debt Relief Experiment

I design a debt relief experiment that randomizes forbearance, term, and interest rates independently in a 2-by-2-by-2 design for delinquent borrowers. Forbearance take-up prevents one in three defaults in the first month, with no long-run effects beyond expiration. Before expiration, forbearance reduces payments by twice as much compared with rate reductions but reduces defaults by less. Using the experimental assignment as an instrument to decompose the effect of future payments entailed by a rate reduction from current liquidity, a dollar change in the present value of future payments has a similar effect on defaults as a 30 cent change in current quarterly payments. Whether forbearance or rate reductions are relatively more effective, the relative sensitivity of behavior to future payments, and whether interest rates affect behavior to the extent that they affect current payments are all tightly linked to balance sheets. Influencing interest rates has benefits through the present value of future payments, which is difficult to replicate using rescheduling policies.

Working Paper