Consumer Finance Working Group

Standard economic approaches to the regulation of retail finance assume that consumers are capable of understanding the terms of financial contracts and choosing only those that maximize their self-interest. On this assumption, the regulatory burden is largely satisfied by mandating full disclosure, as the Truth in Lending Act has long required. This conceptual framework provided an adequate approximation to consumer behavior when retail financial markets were far simpler than they are today, but the recent acceleration of innovation in retail credit markets confronts consumers with a widening array of choices among financial products, increasing their complexity significantly and making consumers’ decisions much more perilous. Abundant evidence of flawed consumer decision making in the recent sub-prime mortgage debacle is just one example of many indicating the potential value of exploring an analytic framework that entertains the possibility of widespread, systematic consumer error and examines its implications for regulatory design.

With support from Russell Sage Foundation and a matching award from the Alfred P. Sloan Foundation, RSF has developed a Working Group on Consumer Finance whose mandate is to explore new lines of behavioral economic research on consumer decision making with the aim of improving the design of regulatory strategies in retail financial markets. In September 2009, an interdisciplinary group of twenty-three economists, cognitive psychologists, and legal scholars agreed to join the working group and attended an introductory meeting at the Foundation in December 2009. Throughout 2010, the working group submitted proposals for exploratory projects, which were evaluated by an Advisory Committee comprising Richard Freeman of Harvard, Christine Jolls of Yale Law School, Roger Noll of Stanford, John Reed, former Citigroup CEO, and RSF’s Richard Thaler, who has agreed to represent the RSF Board on the Advisory Committee.

This initiative was officially closed in June 2014.



David Laibson, Harvard University
Brigitte Madrian, Harvard University
Commitment Savings Accounts and Self Control

Paige Marta Skiba, Vanderbilt University
Check Cashing: Time Preferences, Income Variability and Rationality among the Unbanked $20,000

Justin Sydnor, Case Western Reserve University
How Much House Can We Afford?

Jonathan Zinman, Dartmouth College
From Measurement Toward Modeling in Behavioral Household Finance


Tom Baker, University of Pennsylvania
Toward a Consumer Choice Engine for Insurance Products

Dan Carpenter, Harvard University
Behaviorally Informed File and Use Regulation for Consumer Insurance Products

Eric Johnson, Columbia University
Accounting for Tastes and Skill: The Impact of Individual Differences on Annuity and Post-Mortgage Decision Making

John Lynch, University of Colorado
'Giving Up' in Complex Annuity Decision Making: Attention, Distraction, Procrastination, and Delegation

John Payne, Duke University
Household Financial Decision Processes: The Cases of Annuitization and Mortgages

Suzanne Shu, University of California, Los Angeles
Heuristics and Affect in Long-Term Choices for Annuities and Mortgages

Antoinette Schoar, MIT
The Market for Financial Advice

Eric Johnson, Columbia University
Tom Baker, University of Pennsylvania
Ran Hassin, Hebrew University
Mindsetting: A New Dimension for Choice Architecture and Choice Engines

Antoinette Schoar, Ideas 42
Sendhil Mullainathan, Harvard University
Credit Card Obfuscation

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