Experimental Design Details
The experiment examines how financial offers influence repayment decisions and long-term financial planning. Participants begin by completing a survey that collects background information, such as age, financial literacy, and discretionary spending habits. These variables are used as controls in the analysis to account for individual differences. To ensure a consistent understanding of the task, participants must answer three comprehension questions about the experimental setup.
The primary task involves participants allocating a fixed monthly budget between debt repayment and savings toward a future goal, such as a mortgage downpayment. Savings accrue interest at a fixed rate, encouraging participants to make efficient allocation decisions. This task simulates real-world trade-offs between short-term benefits, such as reduced monthly repayments, and long-term savings growth.
In the control group, participants evaluate four restructuring options, including the option to maintain the status quo, which involves no changes to their current repayment structure. The four options vary in terms of repayment term and monthly repayment amounts. Conversely, participants in the treatment group are required to restructure their debt, as the status quo option is not available. This intervention investigates how removing the option to remain in the current situation influences financial decision-making.
In a follow-up decision, participants can customize various aspects of their loan based on their initial choice (e.g., if the option with a high payout amount was selected, they can adjust the payout amount, with all other loan conditions changing accordingly).
The exit survey includes questions on financial literacy, risk tolerance, and time preferences, offering deeper insights into how individual traits influence decision-making. Participants are rewarded based on their total accumulated downpayment. The rewards are distributed linearly, where higher downpayments earn proportionally higher rewards. The incentivized structure encourages participants to take the task seriously.