Gelezen in ESB: Het effect van framing op pensioenperceptie

In ESB van 12 oktober 2017 stond een artikel over consumentenonderzoek van Prast (ex DNB) en Teppa (DNB) onder 1034 mensen van het CenterPanel: Het effect van framing op pensioenperceptie [pdf].

Methode
Vier random groepen kregen op verschillende wijze een vervangingsratio van 50% bij pensionering te zien en hen werd gevraagd: wat is oordeel om bij pensioen van rond te komen? zeer onvoldoendeonvoldoendevoldoenderuim voldoende. Het goede antwoord is (zeer) onvoldoende

Het %frame luidde: “U krijgt 50% van uw huidige bruto-inkomen”. Andere frames: bedrag in euro per jaar, bedrag in euro per maand, en “0,5 maal uw huidige inkomen

Percentage werkt beter
Respondenten in het percentage frame de verwachte pensioenaanspraak significant vaker als onvoldoende of zeer onvoldoende beschouwen (…) Een aanwijzing dat communicatie in euro’s kennelijk onduidelijk is.” concluderen Prast en Teppa.

Want in het %-frame zegt 82% (zeer) onvoldoende (oranje omcirkeld in tabel hieronder); in de andere frames (blauw omkaderd) zegt 70% (zeer) onvoldoende.

prastteppaESB

Oplossing?
Prast en Teppa extrapoleren: “Als een percentageframe leidt tot meer duidelijkheid (‘bewust­zijn’) bij de deelnemer over de mate waarin zijn pensioen­aanspraak voldoende is, kan de pensioenuitvoerder, met slechts weinig moeite, zijn bereik van de deelnemer verbe­teren en zo voldoen aan het doel van de Wet pensioencom­municatie.”

Op zich ondersteunen de uitkomsten wel deze conclusie, maar ik vind het nogal stellig. En intuïtief vreemd, en niet helemaal in lijn met andere onderzoeken waarin euro’s en %’s vergeleken worden (vaak vindt men euro’s duidelijk).

Prast en Teppa maken zelf ook deze kanttekening: “Een kanttekening daarbij is dat wij slechts heb­ben gekeken naar een vervangingsratio gelijk aan de helft van het huidige inkomen. Nader onderzoek is nodig om te zien of het framingeffect stand houdt bij hogere en lagere vervangingsratio’s.

Replicatie?
Ik vind het opvallend dat de 50%-conditie (“50% van uw huidige bruto-inkomen”) zo anders scoort dan de 0,5 conditie (“0,5 maal uw huidige inkomen”). In het %-frame antwoordt 82% (zeer) onvoldoende, in het decimaal-frame is dat 67%.

Het biedt wel de kans om makkelijk te repliceren. Voor de euro-condities moet je het inkomen van de respondent weten, voor het decimaal-frame niet.

Mogelijk dat we in de komende AFM Consumentenmonitor onder steekproef van N=800 die representatief is voor Nederland 6 random groepen gaan ondervragen (2×3 opzet); met 2 soorten frames (% of decimaal) en 3 waardes: 50%/0,5 – 70%/0,7 – 90%/0,9.

De vraag zou dan luiden voor 50%/0,5 frames:

Stel, u krijgt de volgende informatie over uw toekomstige pensioen:
Als u tot uw pensionering blijft werken, kunt u vanaf het bereiken van de pensioenleeftijd het volgende pensioen verwachten:

Frame A: 50 procent van uw huidige bruto-inkomen
Frame B: 0,5 maal uw huidige bruto-inkomen.

Geef aan in welke mate u dit pensioen voldoende of onvoldoende vindt om van rond te komen. Laat hierbij het eventuele inkomen van uw partner buiten beschouwing.
1. Ruim voldoende
2. Voldoende
3. Onvoldoende
4. Zeer onvoldoende
5. Weet niet

Andere reacties
Guus Pijnenburg is minder enthousiast:

 

Advertenties

Werkt de wildwestwaarschuwing wel? Onderzoek naar de vrijstellingsvermelding Let op! U belegt buiten AFM-toezicht

In het september nummer van het Tijdschrift voor Toezicht beschrijven Nynke van Egmond- de Boer en ik (team Consumentengedrag) een onderzoek naar de vrijstellingsvermelding Let op! U belegt buiten AFM-toezicht. In experimenten in het AFM Consument&Panel leidt afwezigheid van deze waarschuwing tot een hogere investeringsintentie, vooral bij vermogende respondenten die de melding niet kennen.

vb-vrijstelling-prospectus

Voor beleggingsaanbiedingen aan particulieren die buiten toezicht vallen, geldt sinds 2012 een verplichte vrijstellingsvermelding in een vast formaat. In een gerandomiseerd experiment tonen we aan dat afwezigheid van de melding ‘Let op! U belegt buiten AFM-toezicht. Geen vergunning- en prospectusplicht voor deze activiteit’ leidt tot een hogere investeringsintentie (het effect op het daadwerkelijke gedrag is niet gemeten), vooral bij vermogende respondenten die de melding niet kennen (42 procent van de populatie).

Dit lijkt in lijn met een doel van de waarschuwing, namelijk consumenten beschermen door ze te wijzen op hun grotere eigen verantwoordelijkheid bij deze producten.

Met dit gerandomiseerde experiment laten we zien dat het nuttig en uitvoerbaar is voor toezichthouders om hun interventies te testen op effectiviteit.

We hebben onderzoek gedaan met een experimenten onder respondenten met meer dan €100.000 vermogen. Dat zijn potentiële beleggers want een van de mogelijke gronden voor een vrijstelling is namelijk als de waarde van de effecten ten minste €100.000 per belegger bedraagt (zie www.afm.nl/vrijstelling voor meer informatie). De €2,5 miljoen vrijstelling wordt verhoogd naar €5 miljoen. En vanaf 1 oktober 2017 geldt een meld- en informatieplicht voor aanbieders van vrijgestelde beleggingen.

Werkt als je ‘m niet al kent
In algemene zin was de koopintentie in het experiment laag. Toch vonden we een significant effect van aan/afwezigheid van de vrijstellingsvermelding; vooral respondenten die de waarschuwing nog niet kenden, gaven een minder lage koopintentie aan.

fig5zijlstravegmond

In dit experiment hebben we niet daadwerkelijk gedrag bestudeerd, wat we bijvoorbeeld wel gedaan hebben bij het onderzoek naar de kredietwaarschuwingszin; ‘Let op! Geld lenen kost geld’ geen onmiddellijk effect in verkoopomgeving (december 2016).

Wil je het hele artikel hebben? Stuur me een mailtje of download hier Werkt de wildwestwaarschuwing wel_TvT.

TIBER 2017 Symposium #TIBER2017

The TIBER 2017 Symposium on Psychology and Economics took place on August 25, 2017 in Tilburg [full program, my tweets from that day]. Interesting day, and good to see some people from the financial industry (ING, Rabobank).

Hertwig
Keynote Ralph Hertwig (from the Gigerenzer-school) kicked off with a talk on Preferential Heuristics, Uncertainty and the Structure of the Environment.

He started by quoting a 1967 paper Man as an intuitive statistician where Peterson and Beach argue that “Man gambles well”. But the Tversky and Kahneman-paradigm a couple of years later proved more influential, puzzling Hertwig.

Description vs. Experience
Tversky and Kahneman were influential with tasks where risks where described, instead of uncertainty experienced.

Hertwig shows figures from A meta-analytic review of two modes of learning and the description-experience gap (2016) DU Wulff, M Mergenthaler Canesco, R Hertwig.

Especially with low, true probabilities, there are large effects between answers to a choice formulated descriptively, versus the choice made after experiencing pay-offs. (DU =  discrete underweighting). From Wikipedia: “in experienced prospects, people tend to underweight the probability of the extreme outcomes and therefore judge them as being even less likely to occur.”

descexpgap

Adaptive decision maker has to make a trade-off between accuracy-effort. So heuristics can be effective, says Hertwig.

Hertwig on risk communication:

And research methods (why do adults score worse than babies or chimps?)

Parallel sessions
First, I went to Ozan Isler; Honesty, Cooperation & Social Influence, who:

we present a new mind-game that is powerful enough to measure honesty at the
individual level and fast enough to be implemented online. The game consists of forty rounds. In each round, the participant is first asked to think of a number between 0 and 9, then shown a single-digit random number, and finally asked to report whether the two numbers match.

Then I saw a talk about changing faces with FaceGen on a trustworthiness scale and playing a dictator game. The cool thing was the stopping rule: they started with N=30 participants, and would add N=5 until BayesFactor was either > 3 or < 1/3.

Next, I saw Tony Evans: The reputational consequences of generalized trust

Final morning talk: Stefan Trautmann – Implementing Fair Procedures? “We find that unfair outcomes are acceptable for the agents if procedures are perceived as fair. However, with opaque allocation decisions, it may be difficult to commit to fair allocation procedures. Indeed, we find a very high degree of favoritism by the decision
makers when they are forced to allocate unequal outcomes, and have no fair (random) procedure available

Posters
During lunch I read two interesting posters, one by my DNB-colleague Carin van der Cruijsen on DNB Working Paper No. 563: Payments data: do consumers want to keep them in a safe or turn them into gold?

And a poster by a collaborator of Stefan Zeisberger (Nijmegen), whom we’ll also collaborate with. Basically, people do trade on their beliefs if they are in the plus (have gained), but not/less so when they are in the red.

Afternoon sessions
I attended this talk because it used Bayesian statistics, but the unfortunately did not feature very much in the presentation: Peer effects on risky decision making from early adolescence to young adulthood: Specificity and boundary conditions.

Then Less Likely Outcomes Are Valued Less by Gabriele Paolacci (who is male, incidentally): “We found that people value the gift card less when its availability is uncertain.” Somewhat interesting, not very applicable. This effect might counter the scarcity-argument in marketing a bit, but doesn’t seem likely.

Final talk was Jan Stoop with a replication of The Rich Drive Differently, a Study Suggests (2013). Stoop et al found nothing, across wide range of settings and with 2.5x N of original study.

After tea
First up: Financial Incentives Beat Social Norms: A Field Experiment on Retirement Information Search [Netspar presentation, SSRN). Presentation by Inka Eberhardt. I had seen this work before, then presented by co-author Paul Smeets. It is a really big RCT (N=250,000) RCT, sending letters to get them to sign in to their personal webpage at their pension fund. Q&A was a bit disappointing, I didn’t think the answers were particularly strong.

Pollmann’s talk Let’s talk about money: Attachment style, financial communication, and
financial conflict concluded with a suggestion to Nibud for a web tool Let’s talk about money.

Final talk was Diffusion of culpability in reparations behavior. Results for a novel task were presented, fMRI results are forthcoming.

Tungodden
TIBER 2017 was concluded by Bertil Tungodden’s keynote: Fairness and Redistribution: Experimental Evidence.

Tungodden presented on a paper that is nicely summarized in this HBR article: Is It OK to Get Paid More for Being Lucky?

The Rise of Behavioural Discrimination & Virtual Competition

This blog post Big data and first-degree price discrimination (thanks Patricia) led me to the work of Ariel Ezrachi and Maurice Stucke. As Silvia Merler writes:

[Ezrachi and Stucke] argue that online behavioural discrimination will differ from the price discrimination we have seen in the retail world in three important respects:

  1. Big data allow the shift from third-degree, imperfect price discrimination to near perfect price discrimination;
  2. Sellers can use big data to target consumers with the right “emotional pitch” to increase overall consumption (the demand curve shifts to the right)
  3. As more online retailers personalise pricing and product offerings, it will be harder for consumers to discover a general market price and to assess their outside options, thus implying that behavioural discrimination becomes more durable.

Ezrachi and Stucke published a book in 2016: Virtual Competition (on my to read pile, reserved it at the University Library; book’s webpage also contains a lot of extra info/links).

Behavioural discrimination
I did read their paper The rise of behavioural discrimination (37 European Competition Law Review 484 (2016)).

New dynamics that reduce our welfare? (…) Our article explores how e-commerce and the personalisation of our online environment can give rise to behavioural discrimination, a durable, more pernicious form of price discrimination.”

I. Near perfect price discrimination

Third-degree price discrimination, which involves the charging of different prices to different groups. The price can depend, among other things, on your location (i.e. where you live), your age, or your sex. Cinemas, bus services, and restaurants, for example, may charge adults higher prices than children, students or senior citizens.

By contrast, in this article, our focus is on the possible shift to perfect, or first-degree, price discrimination—where firms can identify and charge for each individual the most he or she is willing to pay, i.e. the reservation price.

“Big Data, learning by doing, and the scale of experiments come into play to better approximate your reservation price.”

“In this data-driven economy, the algorithm—to maximise profitability—will estimate the likelihood of our shopping elsewhere or being aware of better deals and accordingly provide us with a convincing sales pitch.” (e.g. coupons and promotion codes for customers more sensitive to outside options, i.e. more price-sensitive customers who are likeley to compare option, more sophisticated consumers. Naieve consumers can be exploited more efficiently).

II. Shifting the demand curve to the right

Sellers using our personal data to induce us to buy more products or services than
we otherwise would have purchased.

A few consumer biases, which firms may exploit to promote consumption:

  • Use of decoys
  • Price steering, e.g. On Orbitz, Mac Users Steered to Pricier Hotels
  • Increasing complexity; facilitate consumer error or bias and manipulate consumer demand to their advantage (…) companies can, by designing the number and types of options they offer, better exploit consumers’ cognitive overload. In increasing complexity, the firms can also increase consumers’ search and switching costs, thereby reducing the visibility (and attraction) of outside options, and giving them more latitude to exploit consumers.
  • Imperfect willpower “framing effects” (how the issue is worded or framed) do matter. Credit cards are one example. Here they cite a Dutch study The abolition of the No-discrimination Rule from 2000 (!) with N=150 consumers (!) surveyed. Dutch
    merchants could impose surcharges or offer discounts based on how the customer was going to pay. Of the consumers surveyed, 74% thought it (very) bad if a merchant asked for a surcharge for using a credit card. But when asked about a merchant offering a cash discount, only 49% thought it (very) bad. A weak spot in an excellent paper.

The road to near-perfect behavioural discrimination will be paved with personalised coupons and promotions: the less price-sensitive online customers may not care as much if others are getting promotional codes, coupons, and so on, as long as the list price does not increase. (p.488)

And:

Another way to frame behavioural discrimination in a palatable manner is to ascribe the pricing deviations to shifting market forces. Few people pay the same price for corporate stock. They accept that the pricing differences are responsive to market changes in supply and demand (dynamic pricing) rather than price discrimination (differential pricing). So once consumers accept that prices change rapidly (such as airfare, hotels, etc.), they have lower expectations of price uniformity among competitors. One hotel may be charging a higher price because of its supply of rooms (rather than discriminating against that particular user). (…) Thus, we may not know when pricing is dynamic, discriminatory, or both.

 

III. The durability of behavioural discrimination

it will be harder to know what others see. (…) As personalised offerings increase, search costs will also increase for consumers seeking to identify the “true” market price.

Behavioural discrimination—while not always possible—could occur more often than we expect. Furthermore, as we shift more of our activities to a controlled online ecosystem, it is likely to intensify.

The power to discriminate may be curtailed by possible pushback from consumers (I personally doubt it).

Price comparison websites may foster, rather than foil, behavioural discrimination and switching costs may be higher than one assumes, despite perceived competition being only a click away. (from the footnotes related to this quote: As more consumers rely (and trust) an intermediary to deliver the best results (whether relevant results to a search query or array of goods and services), the less interested they become in multi-homing—that is, from checking the availability of products and prices elsewhere. And: many users who indicated that when a search result is fails to meet their expectations they will “try to change the search query—not the search engine.”

 

IV. The welfare effects of behavioural discrimination

sellers can manipulate our environment to increase overall consumption, without necessarily increasing our welfare.

Once one accounts the consumer perspective, the social welfare perspective, and the limited likelihood of total welfare increasing, behavioural discrimination is likely a toxic combination. Moreover, behavioural discrimination may blur into actual discrimination due to the limits and costs of refined aggregation.

The worrying thing is that we (and the enforcers) may not even know that we are being discriminated against. Under the old competitive paradigm, one might suspect one was discriminated against if access was inexplicably denied (e.g. restaurants for “whites only”) or was charged a higher price based on this single variable. Under the new paradigm, users may not detect the small but statistically significant change in targeted advertisements (or advertised rates).

 

Conclusion

As pricing norms change, price and behavioural discrimination eventually may be accepted as the new normal. Just as we have accepted (or become resigned to) the quality degradation of air travel, and the rise of airline fees—from luggage to printing boarding passes—our future norms may well include online segmentation and price discrimination.

The costs can be significant. The new paradigm of behavioural discrimination affects not only our pocketbook but our social environment, trust in firms and the marketplace, personal autonomy, privacy and well-being.

 

Some other relevant links:

Why controllers compromise on their fiduciary duties: EEG evidence on the role of the human mirror neuron system

Why controllers compromise on their fiduciary duties: EEG evidence on the role of the human mirror neuron system – Philip I. Eskenazi, Frank G.H. Hartmann & Wim J.R. Rietdijk. Accounting, Organizations and Society 50 (2016): 41-50.

Abstract

Business unit (BU) controllers play a fiduciary role to ensure the integrity of financial reporting. However, they often face social pressure from their BU managers to misreport. Drawing on the literature on the human mirror neuron system, this paper investigates whether controllers’ ability to withstand such pressure has a neurobiological basis. We expect that mirror neuron system functionality determines controllers’ inclination to succumb to social pressure exerted by self-interested managers to engage in misreporting.

We measure mirror neuron system functionality using electroencephalographic (EEG) data from 29 professional controllers during an emotional expressions observation task. The controllers’ inclination to misreport was measured using scenarios in which controllers were being pressed by their manager to misreport.

We find a positive association between controllers’ mirror neuron system functionality and their inclination to yield to managerial pressure. In line with our expectation, we find that this association existed specifically for scenarios in which managers pressed their controllers out of personal rather than organizational interests. We conclude that BU controllers’ neurobiological characteristics are involved in financial misreporting behavior and discuss the implications for accounting research and practice.

Hypothesis: For BU [Business Unit] controllers, we expected that hMNS [human mirror neuron system] functionality predicts controllers’ vulnerability to the social pressure to misreport exerted by BU managers.

An important characteristic of the role of BU controllers is the combination of local (to support their BU managers in operational and strategic decision making) and functional (fiducary duty) responsibilities.

Method: N=29 study with 3 scenario’s x 2 contexts (managers’ personal/ self-interest, or organizational interest).

EEG: Individual levels of hMNS functionality can be observed in electroencephalogram (EEG) recordings of brain activity (…) The associated weakening of the EEG signal is called mu suppression. Mu suppression has been shown to be a robust and valid indicator of hMNS functionality (…) lower values indicate more “mirroring”, associated with higher levels of sensitivity to others’ emotions.

For example scenario below, correlation between cooperation and MU: r = .406, p = .029

exampleeskenazi

Result: Our findings indicate a strong association between hMNS functionality and controllers’ inclination to yield to BU managers’ pressure to misreport when this pressure stems from BU managers’ personal interests rather than from managers’ concerns with organizational interests.

our study suggests that emotional influence may cause excessive alignment between the interests pursued by the BU manager and those served by the reporting behaviors of the BU controller. In designing internal control structures, organizations need to be aware of the reporting risks associated with the expansion of “business partner” controllers.

Low Interest Rates and Risk Taking: Evidence from Individual Investment Decisions

Low Interest Rates and Risk Taking: Evidence from Individual Investment Decisions (July 2017) Chen Lian, Yueran Ma, and Carmen Wang. SSRN version. My summary is from earlier, 2016 version.

Abstract

In recent years, interest rates reached historic lows in many countries. We document that individual investors “reach for yield,” that is, have a greater appetite for risk taking when interest rates are low. Using an investment experiment holding fixed risk premia and risks, we show that low interest rates lead to significantly higher allocations to risky assets, among MTurk subjects and HBS MBAs. This behavior cannot be easily explained by conventional portfolio choice theory or by institutional frictions. We then propose and test explanations related to investor psychology. We also present complementary evidence using historical data on household investment decisions.

We provide evidence that individual investors “reach for yield”, that is, have a greater appetite for risk taking in low interest rate environment (…) We find significantly higher allocations to risky assets in the low rate condition.

Experiments (N=400) with 2 groups, allocate $100.000 between ;
[groep 1] risk free = 5% vs risky asset = 10%
[groep 2] risk free = 1% vs risky asset =6% (investment horizon = 1 year).
We show that individuals demonstrate a stronger preference for risky assets in their investment decisions when the risk-free rate is low. (…) The difference is about 7 to 9 percentage points, on a basis of roughly 60% allocations to the risky asset.

LianPanelA

Why? (what mechanisms?)

  • People may form reference points of investment returns. we find that there is significant reaching for yield behavior when interest rates are below 3%, whereas investment decisions are not significantly different when interest rates are above this level. This cut-off seems consistent with the level of interest rates that most participants are used to prior to recent years
  • Salience of the higher average returns on the risky asset in different interest rate environment. Most simply, 6% average returns relative to 1% risk-free returns is more salient than 10% average returns relative to 5% risk-free returns. Reaching for yield behavior is dampened if investment returns are completely framed in gross terms (e.g. instead of saying 5% returns, we say that one will get 1.05 units for every unit of investment).

 

In the 2017 version they made the graph that I had made myself in my 2016 summary:

LianFig2

Section 5: Suggestive Evidence from Observational Data: the data suggest that portfolio shares of stocks and flows into risky assets increase (while portfolio shares of safe assets and flows into deposits fall) when interest rates decrease. (p.28)

  • In terms of magnitude, a one percentage point decrease in interest rates is associated with about 1.5 percentage points increase in allocations to stocks and a similar size fall in allocations to “cash”.
  • Interestingly, the magnitude of allocations’ response to interest rates seems to be similar in the experiment and in the observational data. (p.29)
  • We see that across different data sources, decreases in interest rates are associated with flows into risky assets and out of safe interest-bearing assets. (p30)
  • we hold the findings in this section 5 to be merely suggestive and complementary to our experimental evidence, yet we are intrigued that data across several different sources show consistent patterns.

 

Other interesting bits:

  • P1: A number of papers also provide empirical evidence that banks, money market mutual funds, and corporate bond mutual funds invest in riskier assets when interest rates are low (Maddaloni and Peydr_o, 2011; Jim_enez, Ongena, Peydr_o, and Saurina, 2014; Chodorow-Reich, 2014; Hanson and Stein, 2015; Choi and Kronlund, 2015; Di Maggio and Kacperczyk, 2016).
  • footnote 1, p1: The \reaching for yield” behavior we study in this paper, most precisely, is that people invest more in risky assets when interest rates are low, holding constant the risks and excess returns of risky assets.
  • Footnote 3, p5: For example, Di Maggio and Kacperczyk (2016) and Choi and Kronlund (2015) show that money market mutual funds and corporate fund mutual funds who reach for yield get larger in inflows, especially when interest rates are near zero. These inflows most likely come from yield seeking end investors. It seems plausible that households’ yield seeking behavior could be an important cause of some financial institutions reaching for yield.
  • P5: our evidence on risk taking and interest rate environment may also have implications for security design and consumer protection, as households’ biases could be exploited by institutions and asset managers that highlight returns and shroud risks (C_el_erier and Vall_ee, 2016).
  • P10-11 In our data, Harvard Business School MBAs and MTurk workers reach for yield by a similar degree. Nor do we find that reaching for yield declines with wealth, investment experience, or education among MTurks, or with investment and work experience in finance among MBAs
  • P32 The impact of the interest rate environment on investor behavior could have important implications for connections between key macroeconomic issues and capital market dynamics and financial stability.

Overcoming Negative Media Coverage: Does Government Communication Matter?

Liu, Brooke Fisher, J. Suzanne Horsley, and Kaifeng Yang. “Overcoming negative media coverage: Does government communication matter?.” Journal of Public Administration Research and Theory (2012): 597-621

Abstract

Public administration scholars often note that government should engage in more effectiveexternal communication to improve citizen trust and maintain political legitimacy. An important part of the belief is that more effective communication can lead to more favorable media coverage that ultimately shapes citizen trust in government. However, the link between government communication and media coverage remains empirically untested.

Through a survey of 881 government and business communicators, this study tests the relationship between external communication activities and media coverage.

The study shows that government organizations report being less likely to have favorable news coverage than their private counterparts, but most government organizations do report that their media coverage is favorable. Moreover, the results show that active media interaction, organizational support for communication, and adequate communication budget are associated with reporting more favorable coverage. In comparison, a different set of variables, except adequate communication budget, are found to affect whether business organizations report having more favorable media coverage.

Empirical research on effects government communication
p598: “Given the importance and challenges, it is crucial for public administration scholars to more rigorously study government communication and its impact on media coverage and, in turn, citizen trust

it is reasonable to state that the mechanisms linking external communication and government performance have not been mapped out with empirical evidence.

The purpose of this study is two-fold:

  1. To identify the types of government communication activities
  2. To test how the activities affect perceived media coverage

Method
p604: “The survey consisted of 68 questions (…) the dependent variable is measured by three dimensions: the extent to which the media coverage is perceived as favorable, accurate, and fair.

Media more negative on government
p599 “results of a survey of government and business communicators found that government communicators reported being covered more frequently and more negatively than business communicators (Liu, Horsley, and Levenshus 2010).”

Government communication people feel they receive more unfavorable press/less favorbale press than business communication professionals, see Table 4.

To further understand the dependent variable, table 4 presents the responses’ detail distribution in government and business subsamples. Note that 9 is the scale midpoint depicting a neutral evaluation. Consistent with the t-test, higher percentages of business communicators (as opposed to their government counterparts) had responses higher than 9. Among government respondents, although very few of them reported extremely low values (3, 4, and 5), 15.3% of them reported that on average their organization had experienced unfavorable media coverage in the past six months. In contrast, 65.3% of government respondents reported favorable media coverage.

4Liuetal

Positive effect media interaction for government
p609: The results show that media interaction for government (Model 2, Beta = 0.29, p < .001) does lead to positive media coverage. Media Interaction is the composite of: Write news releases and advisories, Hold news conferences, Conduct media interviews, Respond to media inquiries, Pitch stories to the media, and Track media clips.

Media interaction (news releases, news conferences, media interviews, responding to media inquiries, pitching stories to the media, and tracking media clips) is found to positively affect media coverage for the government subsample, but no such relationship is found for the business subsample (p612)

Het meten van effecten van de handhaving door de Belastingdienst

In het laatste nummer van het Tijdschrift voor Toezicht van 2016 schrijven drie medewerkers van de Belastingdienst over effectmeting (“een onmisbaar element van ‘goed toezicht’”): “Centraal in dit (beschrijvende en verkennende) artikel staat de vraag hoe de Belastingdienst de effecten van zijn handhavings- en toezichtactiviteiten meet en wat de uitdagingen hierbij zijn.” (p9)

Het meten van effecten van de handhaving door de Belastingdienst (2016) Sjoerd Goslinga, Maarten Siglé en Lisette van der Hel [pdf]

“Met effectmeting vindt de beoordeling plaats of het uitvoeren van de handhavingsactiviteiten daadwerkelijk de determinanten van compliance heeft beïnvloed en of dit vervolgens effect heeft gehad op de compliance” schrijven Goslinga et al.

Bijvoorbeeld: Aangiftecampagne om de compliance (tijdig aangifte doen, voor 1 april) van burgers te verhogen door middel van voorlichting.

bdiensteffect

‘Outcome’ (=effect) representeert in deze effectketen de uiteindelijke impact van de activiteiten van de Belastingdienst op zijn strategische doel: compliance. ‘Output’ (=resultaat) daarentegen is datgene wat door de inspanningen van de Belastingdienst is geproduceerd (zoals het aantal verstuurde brieven of uitgevoerde controles. Het uitvoeren van handhavingsactiviteiten wordt ook wel omschreven als een interventie. In termen van de effectketen gaat het hier om input, proces en output.

De auteurs zijn eerlijk (en reëel) over de stand van zaken met effectmeting:

 

Naar onze mening is de kern van het probleem dat belastingdiensten überhaupt niet gewend zijn om effecten te meten, maar zich vooral beperken tot output omdat dat veelal gemakkelijker vast te stellen is dan effecten.

Uitdagingen
De auteurs noemen vijf uitdagingen voor effectmeting:

  1. Expliciteren aan hoe activiteiten bijdragen (de inzet van mensen en middelen) aan het realiseren van de doelstellingen. Bijvoorbeeld met een doelenboom.
  2. Vinden van de juiste achterliggende oorzaken van (non-)compliance
  3. Meten van effecten van preventieve activiteiten – “Nadenken over nieuwe soorten indicatoren, die verder weg lijken te staan van de outputindicatoren waar belastingdiensten voorheen sterk op stuurden.”
  4. Opzetten van methodologisch verantwoord onderzoek

    Om vast te stellen in hoeverre inspanningen van de Belastingdienst bepalend zijn (geweest) voor dat nalevingsniveau is het noodzakelijk om een vergelijking te maken met het nalevingsniveau in een situatie waarin de inspanningen niet zouden zijn geleverd (counterfactual). (…) Het ideale onderzoeksdesign is de zogenoemde randomized controlled trial of gecontroleerd veldexperiment (p26)

    Er zijn veel situaties denkbaar waarin het niet mogelijk is een hoger niveau van onderzoeksvaliditeit te bereiken; de eerste twee niveaus kunnen dan zeker van toegevoegde waarde zijn. (p25)

  5. Organisatorische inbedding van effectmeting.

    Een uitdaging voor veel toezichthouders is om effectmeting op een structurele manier te borgen in de organisatie en onderdeel te maken van de manier van werken.

 

Effectmeting is een continu proces omdat het bij het realiseren van de (algemene) beleidsdoelstelling gaat om een ‘duurzame’ verandering in het gedrag van belastingplichtigen en de borging van de continuïteit van belastingopbrengsten.

Spanish regulation for labeling of financial products: a behavioral-experimental analysis

Spanish regulation for labeling of financial products: a behavioral-experimental analysis – Y Gómez, V Martínez-Molés, J Vila – Economia Politica, 2016 [Pdf].

Abstract 

This paper assesses the impact of the Spanish Ministry of Economy and
Competitiveness’ (Board of Executives (BOE) Order ECC/2316/2015. Economy
and Competitiveness Ministry, Spain, 2015) new regulation for financial product labeling.

We design and conduct an economic experiment where subjects make risky investment decisions under three different treatments: a control group where subjects have only objective information about the key features of the products they must select and two treatment groups introducing visual labels resembling the labels required under the new Spanish regulation. The results of the experiment are analyzed within the framework of rank-dependent utility theory.

While visual labels do not change the utility function of the subjects, they do significantly affect the subjects’ weighting functions. The introduction of numerical and color-coded labels significantly increases the concavity of the weighting functions and increases pessimism and risk-aversion in cases where the probability of obtaining the best outcome is high.

Labels widen the difference between real subjects’ behavior and that of the perfectly rational agents described by expected utility theory. Consequently, our empirical findings raise doubts as to whether the new regulation actually achieves its objectives.

The regulation seeks to empower retail investors by enhancing their understanding of financial products. Introducing the visual labels, however, seemingly increases the differences between actual risk levels and the decision weights applied by subjects when making decisions.

Moreover, labels increase investors’ pessimism and risk-aversion when the best outcome is likely and fail to alter investors’ risk-aversion when the worst outcome is likely.

giminez

Method was at times too complicated for me (utility & weighting functions), but interesting outcomes nonetheless:

  • Consequently, our empirical findings raise doubts as to whether the new regulation actually achieves its objectives.
  • In summary, visual labels affect subjects’ understanding of risk levels. Visual labels cause subjects’ understanding to diverge from that of perfectly rational agents. Furthermore, labels make subjects more risk averse in cases where the probability of the best output is high.
  • The behavioral experiment presented in this paper shows that the labels proposed under the new regulation are seemingly a long way from achieving their goal. Taking decisions made by the rational agents described in rational choice theory as a benchmark, our experiment shows that both graphical and numerical labels actually worsen subjects’ decision-making. Introducing labels makes retail investors’ decisions less rational.
  • The practitioners claimed that introducing labels has increased the perception of risk associated with the safest products (for instance, bank deposits), mainly among investors with low financial literacy.

Disclosure and warnings are often employed as the solution for everything (market failures). Important and good that such interventions are also measured and assessed on merit. The proof of the pudding is in the eating.

Minimum Payments and Debt Paydown in Consumer Credit Cards

Ben Keys and Jialan Wang have a working paper called Minimum Payments and Credit Card Paydown. Most of my summary below are copy/pasted sentences from the paper.

Abstract

Using a dataset covering one quarter of the U.S. general-purpose credit card market, we document that 29% of accounts regularly make payments at or near the minimum payment. We exploit changes in issuers’ minimum payment formulas to distinguish between liquidity constraints and anchoring as explanations for the prevalence of near-minimum payments. At least 10% of all accounts respond more to the formula changes than expected based on liquidity constraints alone, representing a lower bound on the role of anchoring.

Using a back-of-envelope calculation, we estimate that anchoring consumers would save at least $570 million per year in interest charges if all issuers adopted the highest observed minimum payment formula in our sample.

Disclosures implemented by the CARD Act, an example of one potential policy solution to anchoring, resulted in fewer than 1% of accounts adopting an alternative suggested payment. Our results show that the design and salience of contract terms in credit products have significant impacts on household balance sheets.

Keys and Lang  position their paper as “the first empirical study to estimate the economic signicance of anchoring in the credit card market”; “Because the minimum payment is a lower bound on the optimal payment amount for the vast majority of consumers, anchoring would downwardly bias payment amounts and lead to suboptimally high debt levels, lower average consumption, and greater consumption volatility for affected consumers.”

They used the CFPB Credit Card Database (CCDB), that covered February 2008 to December 2013, and the issuers in the full dataset comprise over 85% of credit card industry balances. Based on a 1% random sample with about 40 million observations, they analysed three questions:

  1. Who pays the minimum? “We find that 29% of accounts pay exactly [9%] or close to (i.e. within $50 of) [20%] the minimum in most months. (…) Either many consumers are liquidity constrained at amounts that happen to be near the minimum, or that repayment decisions are in influenced by anchoring.”In the 1970s, typical minimum payments were about 5% of the outstanding balance. By the 2000s, the average minimum payment had fallen to 2%.

    Payment behavior is highly persistent over time both within and across accounts, it is only weakly correlated with traditional proxies for liquidity constraints.

  2. Minimal payments due to anchoring? “Taking advantage of the fact that several issuers changed their minimum payment formulas during the sample period. allows us to estimate the fraction of anchoring consumers by measuring before and after formula changes. using a dierence-in-dierences approach we nd that 9 to 20% of all accounts changed their payments by more than the mechanical effect alone.”At least 22% of accounts payed close to the minimum and at least 9% of all accounts anchor to the minimum payment. Estimated range is between 22% and 38%. Notably, the behavioral response is consistent, yielding a signicant fraction of anchoring consumers in response to both minimum payment increases and decreases. Consumers’ repayment choices are sensitive to changes in minimum payment formulas.
  3. Did the CARD-act nudge work? “”Nudges” that encourage higher payments; they measured the effect of one such disclosure required by the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. The disclosure was mandated on more than half of all statements, and presents a calculation of the payment needed to amortize the outstanding balance in three years.” Figure 7 below shows what the disclosure looks like. “Fewer than 1% of accounts adopt the three-year repayment amount (…) a prominent policy change aimed at de-biasing consumers failed to yield a large economic effect relative to the influence of anchoring.”

fig7keysjang

We interpret the fraction of accounts that adopt the three-year repayment amount as an estimate of the ability for mandated disclosure to establish new anchors for consumer payments. The regulation specified that consumers who paid their balances in full for two months in a row and those whose minimum payments are higher than the three-year repayment amount are exempt from the disclosures.

Panel B of Figure 8 (see below) presents the difference-in-differences results around the implementation date. There are no pre-trends in the period prior to the implementation of the disclosure, in large part because very few consumers actively chose the three-year repayment amount in the absence of the disclosure.

keysJangFig8

In the five months following the CARD Act, we observe a sharp increase in the share of accounts paying the three-year disclosure amount. Although the economic impact is small, with treatment effects of less than 1%, the effect is statistically significant. Another trend visible in the figure is a deterioration of the effect of the disclosure over time. One reason for the decline in the disclosure’s effect could be habituation as consumers become accustomed to seeing the disclosure and “tune out” after its novelty wears off. We use this medium-run effect of 0.5% as the benchmark estimate of the disclosure’s overall impact.

Economic significance
Assuming that 0.5% of consumers who adopt the three-year payment amount would have otherwise made the minimum payment, we find that the disclosures led to an $0.18 per month increase in payments averaged across all accounts. We estimate that the disclosures saved consumers $62 million in interest charges in 2013.

If the disclosures had instead caused all anchoring consumers (estimated range between 22% and 38%) to move from the minimum payment to the three-year payment amount, we find that the interest savings in 2013 would have been two orders of magnitude larger, between $2.7 and $4.7 billion. The effect of the disclosures is substantially smaller than the economic role
of anchoring.

Conclusion
The modest effects we document of the CARD Act disclosures illustrate the challenges of changing real-world behavior using traditional forms of disclosure.

The answers to the 3 questions:

  1. Who pays the minimum? 29%
  2. Minimal payments due to anchoring? 22% – 38%
  3. Did the CARD-act nudge work? Yes, but very little (<1%)