Publications

August 2023
Article

Do Rating Agencies Behave Defensively for Higher Risk Issuers?

By: Samuel B. Bonsall IV, Kevin Koharki, Pepa Kraft, Karl A. Muller III and Anywhere Sikochi

We examine whether rating agencies act defensively toward issuers with a higher likelihood of default. We find that agencies' qualitative soft rating adjustments are more accurate as issuers' default risk grows, as evidenced by the adjustments leading to lower Type I... View Details

Keywords: Credit Rating Agencies; Soft Rating Adjustments; Default; Credit; Performance Evaluation; Measurement and Metrics; Financial Institutions; Risk Management

2022
Article

How to Choose a Default

By: John Beshears, Richard T. Mason and Shlomo Benartzi

We have developed a model for setting a default when a population is choosing among ordered choices—that is, ones listed in ascending or descending order. A company, for instance, might want to set a default contribution rate that will increase employees’ average... View Details

Keywords: Nudge; Choice Architecture; Behavioral Economics; Behavioral Science; Default; Savings; Decision Choices and Conditions; Behavior; Motivation and Incentives

March 2021
Article

Active Choice, Implicit Defaults, and the Incentive to Choose

By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian

Home-delivered prescriptions have no delivery charge and lower copayments than prescriptions picked up at a pharmacy. Nevertheless, when home delivery is offered on an opt-in basis, the take-up rate is only 6%. We study a program that makes active choice of either home... View Details

Keywords: Active Choice; Defaults; Implicit Defaults; Incentives; Consumer Behavior; Decision Choices and Conditions; Motivation and Incentives

June 2020
Article

Lazy Prices

By: Lauren Cohen, Christopher J. Malloy and Quoc Nguyen

We explore the implications of a subtle "default" choice that firms make in their regular reporting practices, namely that firms typically repeat what they most recently reported. Using the complete history of regular quarterly and annual filings by U.S. corporations... View Details

Keywords: Default Behavior; Inertia; Firms; Disclosure; Information; Business or Company Management; Behavior; Annual Reports; Corporate Disclosure; Financial Reporting; United States

SSRN

November 2019
Article

When and Why Defaults Influence Decisions: A Meta-analysis of Default Effects

By: Jon M. Jachimowicz, Shannon Duncan, Elke U. Weber and Eric J. Johnson

When people make decisions with a pre-selected choice option—a “default”—they are more likely to select that option. Because defaults are easy to implement, they constitute one of the most widely employed tools in the choice architecture toolbox. However, to decide... View Details

Keywords: Choice Architecture; Defaults; Default Effects; Decision Making; Behavior; Analysis

2019
Chapter

Behavioral Economics and Health-Care Markets

By: Amitabh Chandra, Benjamin Handel and Joshua Schwartzstein

This chapter summarizes research in behavioral health economics, focusing on insurance markets and product markets in health care. We argue that the prevalence of choice difficulties and biases leading to mistakes in these markets establish a special place for them in... View Details

Keywords: Behavioral Economics; Consumer Behavior; Economics; Health Care and Treatment; Insurance; Markets

Article

Default Neglect in Attempts at Social Influence

By: Julian Zlatev, David P. Daniels, Hajin Kim and Margaret A. Neale

Current theories suggest that people understand how to exploit common biases to influence others. However, these predictions have received little empirical attention. We consider a widely studied bias with special policy relevance: the default effect, which is the... View Details

Keywords: Social Influence; Default Effect; Nudges; Choice Architecture; Decision Making; Behavior

Research Summary

Overview

By: Julian J. Zlatev

First, Professor Zlatev studies how people make decisions that reinforce a sense that they are good or moral. He studies the psychology behind dual motive behaviors—actions that incorporate self-interested and prosocial motives—and the structure of moral identity. For... View Details

Forthcoming
Article

Reflexivity in Credit Markets

By: Robin Greenwood, Samuel G. Hanson and Lawrence J. Jin

Reflexivity is the idea that investors' biased beliefs affect market outcomes and that market outcomes in turn affect investors’ future biases. We develop a dynamic behavioral model of the credit cycle featuring this two-way feedback loop. Investors form beliefs about... View Details

Keywords: Reflexivity; Attitudes; Financial Markets; Forecasting and Prediction; Investment; Credit