Framing and Preferred Loan Plan: An Experimental Study

Last registered on August 22, 2022
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Pre-Trial

Trial Information

General Information

Title
Framing and Preferred Loan Plan: An Experimental Study
RCT ID
AEARCTR-0009290
Initial registration date
April 22, 2022

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
April 28, 2022, 5:56 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
August 22, 2022, 7:07 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
India
Region
Ahmedabad, Gujarat

Primary Investigator

Name
Puneet Arora
Affiliation
Management Development Institute Gurgaon
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Other Primary Investigator(s)

PI Name
Khushali Dutt
PI Affiliation
Ahmedabad University
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Additional Trial Information

Status
Completed
Start date
2022-04-25
End date
2022-08-20
Keywords
Behavior, Finance & Microfinance
Additional Keywords
Framing, Loan, Anchoring
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Neoclassical economics says that interest rate, duration, monthly payments, total payments, etc. are aspects people consider while making borrowing decisions. However, very few studies explore the use of heuristics/behavioral biases in such decisions. Using a combination of lab and lab-in-the-field experiment, we study whether framing of interest rate information in different ways cause a change in their loan preferences. Any preference reversal observed in loan choices due to the framing effect would imply potential sub-optimal decision making. More specifically, it would be interesting to see whether there are any gender differences in how individuals suffer from such behavioral biases.
External Link(s)

Registration Citation

Citation
Arora, Puneet and Khushali Dutt. 2022. "Framing and Preferred Loan Plan: An Experimental Study." AEA RCT Registry. August 22. https://doi.org/10.1257/rct.9290-1.2
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Experimental Details

Interventions

Intervention(s)
Subjects will be assigned to two different frames of loan-plan information in an A/B and B/A mode to see whether the frame affects their preference ordering.
Intervention Start Date
2022-04-25
Intervention End Date
2022-08-20

Primary Outcomes

Primary Outcomes (end points)
Preference ranking, Fraction of best loan plans chosen (best loan plan can be determined based on the earnings formula given to subjects)
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Subjects will fill demographic and financial literacy survey, post which they will be presented with risk-elicitation task, and finally with 10 loan plan choice rounds where each subject will observe both kinds of frames in an AB/BA kind of within design.
Experimental Design Details
Task 1: Participants will first fill out a demographic + financial knowledge survey
Task 2: Risk-preference elicitation task based on Holt and Laury (2002)
Task 3: 10 decision-making rounds

For Task 3, subjects will be given the earnings formula that will determine their earnings based on their chosen plan. The earnings formula has been designed in a way that to maximize their earnings, subjects must choose the plan that minimizes the present discounted value of total money paid. The discount rate used in that formula is 0.97 every year.

If subjects are not behaviorally biased, they'll choose the optimal plans in every round that minimizes the present discounted value of the total interest paid at the end of the tenure. However, if subjects have a behavioral anchoring bias, then they may select a loan plan based on the frame it is presented. We expect that in the frame where we provide monetary value of the total interest payment to be paid at the end of the tenure, it will act as an anchor and they'll choose the one that minimizes that total monetary interest payment.

In the frame, where only yearly % interest payment is mentioned, they may anchor their choice on interest rate or EMI.


Randomization Method
Qualtrics does the randomization.
Randomization Unit
Individual level randomization: Some subjects getting AB and others getting BA
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
200
Sample size: planned number of observations
2000 (10 decision tasks per student or cluster)
Sample size (or number of clusters) by treatment arms
100 students in AB frame and 100 students in BA frame
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
University Research Board, Ahmedabad University
IRB Approval Date
2022-04-21
IRB Approval Number
N/A
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
June 10, 2022, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
June 10, 2022, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
211 students
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
2110 (211 students and 10 decisions per student)
Final Sample Size (or Number of Clusters) by Treatment Arms
1055 observations in each treatment
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials