Crowdsourcing Financial Information to Change Spending Behavior
SpeakersMichael Weber (The University of Chicago, United States)
LocationTinbergen Institute, room 1.60
Date and time
April 24, 2019
12:45 - 14:00
We document ﬁve eﬀects of providing individuals with crowdsourced spending information about their peers (individuals with similar characteristics) through a FinTech app. First, users who spend more than their peers reduce their spending signiﬁcantly, whereas users who spend less keep constant or increase their spending. Second, users’ distance from their peers’ spending aﬀects the reaction monotonically in both directions. Third, users’ reaction is asymmetric – spending cuts are three times as large as increases. Fourth, lower-income users react more than others. Fifth, discretionary spending drives the reaction in both directions and especially cash withdrawals, which are commonly used for incidental expenses and anonymous transactions. We argue Bayesian updating, peer pressure, or the fact that bad news looms larger than (equally-sized) good news cannot alone explain all these facts.