The Luxury of Rounding: Heuristics and Private Information

Hu, Xiaowen; Kraft, Andreas

doi:10.2139/ssrn.6083207

Download This Paper

Open PDF in Browser

Add Paper to My Library

The Luxury of Rounding: Heuristics and Private Information

SMU Cox School of Business Research Paper No. 26-1

80 Pages Posted: 29 Jan 2026 Last revised: 5 Jun 2026

See all articles by Xiaowen Hu

Xiaowen Hu

Southern Methodist University (SMU) - Finance Department

Andreas Kraft

University of Chicago - Booth School of Business

Date Written: January 16, 2026

Abstract

We study how deviations from commonly used decision heuristics can reveal economically meaningful private information. In our empirical setting of loan-amount choices on a major FinTech platform, borrowers' non-round choices predict credit risk beyond standard observables. Using unique field data, a stylized model, a quasi-experimental policy shock, and a laboratory experiment, we identify a mechanism in which tighter financial constraints raise the marginal value of precision, giving borrowers stronger incentives to deviate from the round-number heuristic. These borrowers experience worse repayment outcomes, yet this information is not reflected in platform-set rates, exposing retail investors to disproportionate risk.

Keywords: Behavioral Heuristics, Private Information, Consumer Credit, Financial Constraints

JEL Classification: C91, D14, D82, D91, G51

Suggested Citation: Suggested Citation

Hu, Xiaowen and Kraft, Andreas, The Luxury of Rounding: Heuristics and Private Information (January 16, 2026). SMU Cox School of Business Research Paper No. 26-1, Available at SSRN: https://ssrn.com/abstract=6083207 or http://dx.doi.org/10.2139/ssrn.6083207