Overview
The Center for Research on Consumer Financial Decision Making conducts original scientific research and promotes dialogue among experts from academia, business, and government on the topic of how to help consumers make better financial decisions.
Consumer welfare is strongly affected by household financial decisions large and small: choosing mortgages; saving to fund college education or retirement; using credit cards to fund current consumption; choosing how to “decumulate” savings in retirement; deciding how to pay for health care and insurance; and investing in the stock market. In all of these domains, consumers are often poorly informed and susceptible to making serious errors that have large personal and societal consequences.
Basic research in judgment and decision making, psychology, consumer research, behavioral finance, and behavioral economics can inform our understanding of how consumers actually make such decisions and how they can be helped to make better decisions by innovations in public policy, business, and consumer education.
About
The mission of the Center is to support interdisciplinary scholarship that informs theory, practice, and public policy pertaining to consumer financial decision-making. The Center will conduct basic research and more applied work to inform public policy. It will also engage in educational outreach aimed at improving consumer welfare by fostering conversations among consumer groups, public policy officials, business people serving financial markets, and researchers, and will foster conversations across the University of Colorado among scholars with common interests in these topics.
Research at the center focuses on understanding the ways consumers make complex financial decisions. For instance, the center received a Sloan and Sage Foundation grant to research how people select annuities. An annuity is a type of financial insurance for retirees; basically consumers pay a lump sum of money to a company that in exchange agrees to make periodic payments to the retirees for the rest of their lives.
Current Projects
Journal Of Marketing Research Special Issue on Consumers’ Financial Decision Making
Journal of Marketing Research is preparing for a special interdisciplinary issue on consumers’ financial decision making with an expected publish date of November 2011. Consumer welfare is strongly affected by household financial decisions large and small: choosing mortgages; saving to fund college education or retirement; using credit cards to fund current consumption; using high-interest payday loans or tax refund loans; choosing how to “decumulate” savings in retirement, perhaps by use of annuities; deciding how to pay for health care and insurance; and investing in the stock market to increase personal wealth. In all these domains, consumers are often poorly informed and susceptible to making serious errors that have large personal and societal consequences. Basic research in judgment and decision making, psychology, consumer research, behavioral finance, and behavioral economics can inform our understanding of how consumers actually make such decisions and how they can be helped to make better decisions by innovations in public policy, business, and consumer education.
We invited scholars from all these fields to submit papers for the special issue. We also welcomed papers about consumer financial decision making and the law and empirical papers on public policy interventions that can improve consumers’ financial decisions. We expect this special issue to lead to significant cross-fertilization across fields and, therefore, to papers of particularly high impact. The Russell Sage Foundation and the Alfred P. Sloan Foundation are sponsoring this special issue as part of their joint initiative in support of behavioral research on consumer finance.
Editors
- Guest Editor-in-Chief: John Lynch, University of Colorado Boulder
- Guest Editors: Shlomo Benartzi, University of California, Los Angeles Stefano DellaVigna, University of California, Berkeley George Loewenstein, Carnegie Mellon University
Forthcoming Articles
Expected Publication Date: November 2011
Submission deadline has passed.
Complex Decisions for Consumer Financial Products
The Center received a grant from the Alfred Sloan Foundation and the Russell Sage Foundation for research on how consumers make decisions about annuities. An annuity is a type of financial longevity insurance for retirees that protects consumers from outliving their savings if they live a long time. They pay a lump sum of money to a company that in exchange agrees to make periodic payments to the retirees for the rest of their lives. The annuity choices for Baby Boomers nearing retirement are confusing, and many people do not even know that annuities are an option. If Baby Boomers mismanage their savings and run out of money it becomes a larger societal problem, so understanding how consumers cope with this daunting marketplace is needed to educate retirees on their choices and inform policymakers of the potential dangers of mass retirement savings mismanagement.
Consumer Financial Literacy and Downstream Financial Behaviors
Consumers face increasing demands to take ensure their own financial security, navigating financial instruments for borrowing, saving, and managing their day-to-day budgets. Much published research shows dramatic effects of measures of financial literacy on healthy financial behaviors, leading to investment by school systems, employers, and other parties to create educational programs to improve literacy and thereby financial behaviors. By now there are hundreds of studies that relate financial literacy to financial behaviors, and we are synthesizing this research to show what works and what does not work in producing effects on downstream financial behavior.
Mortgage Recommender System
Many have suggested that the financial crisis was caused by consumers choosing mortgages that they did not understand. This has led to policy remedies that include either a) better disclosures of the risks and terms of complex financial products, or b) product restrictions to make it difficult or impossible for consumers to choose products other than “plain vanilla” mortgages (e.g., 30 year fixed). Our work suggests that a better role of government would be to require electronic disclosure of loan terms that would allow the creation of decision aids that would provide consumers with timely, personalized risk information and that would help consumers form “consideration sets” in line with their own tastes. For some consumers, products other than a 30-year fixed mortgage really may be the best solution, so we are working to build decision aids that help people identify alternatives that are a good fit to their personal circumstances and tastes. make better choices of housing and financing for that housing.
News
Yahoo! Finance
July 21, 2011
The new and improved credit-card statements — required by federal law — are meant to help consumers. But despite the added disclosures and clarifications, plenty of people still read the numbers wrong, according to a new study at the Conference on Consumer Financial Decision Making held last month at the University of Colorado's Leeds School of Business in Boulder.
Leeds School of Business
June 14, 2011
The 2011 Boulder Summer Conference on Consumer Financial Decision Making highlights research about the problems of consumer financial decision making. Hosted by CU-Boulder's Center for Research on Consumer Financial Decision Making and by the Leeds School of Business.
Yahoo! Finance
August 20, 2010
Yahoo! Finance is teaming up with researchers at the University of Colorado Leeds School of Business and Duke University on a new study of couples and money.
Events
Conference
June 24–26, 2012
St Julien Hotel
900 Walnut Street
Boulder, CO 80302
877.303.0900
Group Code: GRPCFD
Cutting edge research on consumer financial decision making by scholars across diverse fields: economics, psychology, sociology, anthropology, marketing, finance, and consumer sciences. Lively discussion of this research by scholars, regulators, consumer advocates, and financial services professionals.
Past Events
Conference
June 26–28, 2011
St Julien Hotel
900 Walnut Street
Boulder, CO 80302
877.303.0900
Group Code: GRPLSB
Map & Directions
Cutting edge research on consumer financial decision making by scholars across diverse fields: economics, psychology, sociology, anthropology, marketing, finance, and consumer sciences. Lively discussion of this research by scholars, regulators, consumer advocates, and financial services professionals.
