Financial Product Sensitivity Predicts Financial Health

Forthcoming, Journal of Behavioral Decision Making

37 Pages Posted: 6 Nov 2019

See all articles by Adam Eric Greenberg

Adam Eric Greenberg

Bocconi University - Department of Marketing

Abigail B. Sussman

University of Chicago - Booth School of Business

Hal Hershfield

University of California, Los Angeles (UCLA) - Marketing Area

Date Written: May 13, 2019

Abstract

Recent research has aimed to understand how people consider financial decisions because they have important consequences for well-being. Yet, existing research has largely failed to examine how attitudes and behaviors vary as a function of the specific financial product (e.g., debt type). We ask to what extent people differentiate between similarly categorized financial products (e.g., debt or investment) as a function of their terms (e.g., interest costs, expected returns), and whether such differentiation predicts financial health. Across four studies, we find not only that there are individual differences in attitudes toward similar financial products (e.g., two distinct loans), but also that the extent to which a consumer is averse to high-cost versus low-cost products predicts financial health. This relationship cannot be fully explained by financial literacy, numeracy, or intertemporal discounting. In addition, nudging people toward differentiating between financial products promotes decisions that are aligned with financial health.

Keywords: consumer financial decision making, debt, investment, well-being, financial literacy

JEL Classification: D14, G41, I31

Suggested Citation

Greenberg, Adam Eric and Sussman, Abigail B. and Hershfield, Hal, Financial Product Sensitivity Predicts Financial Health (May 13, 2019). Forthcoming, Journal of Behavioral Decision Making, Available at SSRN: https://ssrn.com/abstract=3393051

Adam Eric Greenberg (Contact Author)

Bocconi University - Department of Marketing

Via Roentgen, 1 (4th floor)
Milan, MI 20136
Italy

Abigail B. Sussman

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Hal Hershfield

University of California, Los Angeles (UCLA) - Marketing Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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