Published Papers

In this paper, I identify shocks to interest rates resulting from two administrative details in adjustable-rate mortgage contract terms: the choice of financial index and the choice of lookback period. I find that a 1 percentage point increase in interest rate at the time of adjustable-rate mortgage (ARM) reset results in a 2.5 percentage increase in the probability of foreclosure in the following year, and that each foreclosure filing leads to an additional 0.3 to 0.6 completed foreclosures within a 0.10-mile radius. In explaining this result, I emphasize price effects, bank-supply responses, and borrower responses arising from peer effects.

This research investigates whether a contextual factor-social density, defined as the number of people in a given area-influences consumers' propensity to share information. We propose that high- (vs. low-) density settings make consumers experience a loss of perceived control, which in turn makes them more likely to engage in word of mouth to restore it. Six studies, conducted online as well as in laboratory and naturalistic settings, provide support for this hypothesis. We demonstrate that social density increases the likelihood of sharing information with others and that a person's chronic need for control moderates this effect. Consistent with the proposed process, the effect of social density on information sharing is attenuated when participants have the opportunity to restore control before they engage in word of mouth. We also provide evidence that sharing information restores perceived control in high-density environments, and we disentangle the effect of social density from that of physical proximity.

Previous research on word of mouth (WOM) has presented inconsistent evidence on whether consumers are more inclined to share positive or negative information about products and services. Some findings suggest that consumers are more inclined to engage in positive WOM, whereas others suggest that consumers are more inclined to engage in negative WOM. The present research offers a theoretical perspective that provides a means to resolve these seemingly contradictory findings. Specifically, the authors compare the generation of WOM (i.e., consumers sharing information about their own experiences) with the transmission of WOM (i.e., consumers passing on information about experiences they heard occurred to others). They suggest that a basic human motive to self-enhance leads consumers to generate positive WOM (i.e., share information about their own positive consumption experiences) but transmit negative WOM (i.e., pass on information they heard about others' negative consumption experiences). The authors present evidence for self-enhancement motives playing out in opposite ways for WOM generation versus WOM transmission across four experiments.

We investigate the existence and importance of family welfare cultures, where the receipt of a welfare program by one generation causes increased participation in the next generation. Our context is Norway's disability insurance (DI) system. To overcome the challenge of correlated unobservables across generations, we take advantage of random assignment of judges to DI applicants whose cases are initially denied. Some appeal judges are systematically more lenient, which leads to random variation in the probability a parent will be allowed DI. Using this exogenous variation, we find strong evidence for a causal link across generations: when a parent is allowed DI at the appeal stage, their adult child's participation over the next five years increases by 6 percentage points. This effect grows over time, rising to 12 percentage points after 10 years. Although these findings are specific to our setting, they highlight that welfare reforms can have long-lasting effects on program participation, since any original effect on the current generation could be reinforced by changing the participation behavior of their children as well. The detailed nature of our data allows us to compare the intergenerational transmission with spillover effects in other networks and to explore mechanisms.

We estimate peer effects in paid paternity leave in Norway using a regression discontinuity design. Coworkers and brothers are 11 and 15 percentage points, respectively, more likely to take paternity leave if their peer was exogenously induced to take up leave. The most likely mechanism is information transmission, including increased knowledge of how an employer will react. The estimated peer effect snowballs over time, as the first peer interacts with a second peer, the second peer with a third, and so on. This leads to long-run participation rates which are substantially higher than would otherwise be expected.

This paper investigates whether peer effects play an important role in retirement savings decisions. We use individual data from employees of a large university to study whether individual decisions to enroll in a Tax Deferred Account plan sponsored by the university, and the choice of the mutual fund vendor for people who choose to enroll, are affected by the decisions of other employees in the same department. To overcome the identification problems, we divide the departments into sub-groups (along gender, status, age, and tenure lines) and we instrument the average participation of each peer group by the salary or tenure structure in this group. Our results suggest that peer effects may be an important determinant of savings decisions.

This paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees' decisions to enroll in a Tax Deferred Account (TDA) retirement plan within a large university. The experiment encouraged a random sample of employees in a subset of departments to attend a benefits information fair organized by the university, by promising a monetary reward for attendance. The experiment multiplied by more than five the attendance rate of these treated individuals (relative to controls), and tripled that of untreated individuals within departments where some individuals were treated. TDA enrollment five and eleven months after the fair was significantly higher in departments where some individuals were treated than in departments where nobody was treated. However, the effect on TDA enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did. We provide three interpretations-differential treatment effects, social network effects, and motivational reward effects-to account for these results.

We hypothesize that there is a general bias, based on both innatepredispositions and experience, in animals and humans, to give greater weight to negative entities (e.g., events, objects, personal traits). This is manifested in 4 ways: (a) negative potency (negative entities are stronger than the equivalent positive entities), (b) steeper negative gradients (the negativity of negative events grows more rapidly with approach to them in space or time than does the positivity of positive events, (c) negativity dominance (combinations of negative and positive entities yield evaluations that are more negative than the algebraic sum of individual subjective valences would predict), and (d) negative differentiation (negative entities are more varied, yield more complex conceptual representations, and engage a wider response repertoire). We review evidence for this taxonomy, with emphasis on negativity dominance, including literary, historical, religious, and cultural sources, as well as the psychological literatures on learning, attention, impression formation, contagion, moral judgment, development, and memory. We then consider a variety of theoretical accounts for negativity bias. We suggest that 1 feature of negative events that make them dominant is that negative entities are more contagious than positive entities.

Using a field experiment in a 401(k) plan, we measure the effect of disseminating information about peer behavior on savings. Low-saving employees received simplified plan enrollment or contribution increase forms. A randomized subset of forms stated the fraction of age-matched coworkers participating in the plan or age-matched participants contributing at least 6% of pay to the plan. We document an oppositional reaction: the presence of peer information decreased the savings of nonparticipants who were ineligible for 401(k) automatic enrollment, and higher observed peer savings rates also decreased savings. Discouragement from upward social comparisons seems to drive this reaction.

Using unique data on employee stock purchase plans (ESPPs), we examine the influence of networks on investment decisions. Comparing employees within a firm during the same election window with metro area fixed effects, we find that the choices of coworkers in the firm's ESPP exert a significant influence on employees' own decisions to participate and trade. Moreover, we find that the presence of high-information employees magnifies the effects of peer networks. Given participation in an ESPP is value-maximizing, our analysis suggests the potential of networks and targeted investor education to improve financial decision-making.

This paper studies the way that word-of-mouth communication aggregates the information of individual agents. We find that the structure of the communication process determines whether all agents end up making identical choices, with less communication making this conformity more likely. Despite the players' naive decision rules and the stochastic decision environment, word-of-mouth communication may lead all players to adopt the action that is on average superior. These socially efficient outcomes tend to occur when each agent samples only a few others.

This paper analyzes a model of social interaction in which individuals care about status as well as "intrinsic" utility (which refers to utility derived directly from consumption). Status is assumed to depend on public perceptions about an individual's predispositions rather than on the individual's actions. However, since predispositions are unobservable, actions signal predispositions and therefore affect status. When status is sufficiently important relative to intrinsic utility, many individuals conform to a single, homogeneous standard of behavior, despite heterogeneous underlying preferences. They are willing to conform because they recognize that even small departures from the social norm will seriously impair their status. The fact that society harshly censures all nonconformists is not simply assumed (indeed, status varies smoothly with perceived type); rather, it is produced endogenously. Despite this penalty, agents with sufficiently extreme preferences refuse to conform. The model provides an explanation for the fact that standards of behavior govern some activities but do not govern others. It also suggests a theory of how standards of behavior might evolve in response to changes in the distribution of intrinsic preferences. In particular, for some values of the preference parameters, norms are both persistent and widely followed; for other values, norms are transitory and confined to small groups. Thus the model produces both customs and fads. Finally, an extension of the model suggests an explanation for the development of multiple subcultures, each with its own distinct norm.