Can Facing the Truth Improve Outcomes? Effects of Information in Consumer Finance

81 Pages Posted: 27 Jan 2020 Last revised: 25 Jan 2021

See all articles by Jessica Fong

Jessica Fong

University of Michigan Ross School of Business

Megan Hunter

Boston College - Carroll School of Management

Date Written: January 24, 2021

Abstract

This paper explores the impact of information avoidance in the context of consumer finance. Specifically, under what circumstances do individuals avoid information about their credit, and how does avoiding this information affect their future credit scores? Using data from a consumer finance platform, we find that a decline in credit score decreases the likelihood that an individual views her credit report in the future. We then measure the impact of receiving information on future credit scores, especially for those likely to avoid information. To obtain a causal local average treatment effect, we use variation in whether an individual views her credit report induced by email campaign A/B tests on a subsample of users who do not opt out of email communication. We find heterogeneous effects of information on credit scores. For individuals who were more likely to avoid information (users whose credit scores were decreasing), viewing their credit reports further decreases credit scores, while information increases credit scores for individuals less likely to avoid information. This finding suggests that encouraging individuals to access information when they are more likely to avoid information may worsen their financial health. We discuss the implications for firms' targeting strategies in retention efforts.

Keywords: information avoidance, marketing, consumer finance, instrumental variables

Suggested Citation

Fong, Jessica and Hunter, Megan, Can Facing the Truth Improve Outcomes? Effects of Information in Consumer Finance (January 24, 2021). Available at SSRN: https://ssrn.com/abstract=3502442 or http://dx.doi.org/10.2139/ssrn.3502442

Jessica Fong

University of Michigan Ross School of Business ( email )

701 Tappan Ave
Ann Arbor, MI 48109
United States

Megan Hunter (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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