Speaker: Sean Higgins
Affiliation: Northwestern University
Date and time: Wednesday, August 27, 2025 15:00 (Santiago, GMT-04:00)
Location:

• Auditorio at the Central Bank of Chile, Morandé 115, second floor.
• Online meeting

Registration: seminarios@bcentral.cl

Abstract:How do biased beliefs about the distribution of interest rates affect search, negotiation, and loan terms in consumer credit markets? In collaboration with Chile’s financial regulator, we conducted a randomized controlled trial with 112,063 loan seekers where we elicited beliefs about the interest rate distribution, then showed treated participants a price comparison tool that we built using administrative data on the universe of consumer loans merged with borrower characteristics. The tool shows loan seekers a conditional distribution of interest rates based on similar loans obtained recently by similar borrowers. We find that most consumers thought interest rates were lower than they actually were, and the price comparison tool caused them to increase their expectations about the interest rate they would obtain by 55%. Most consumers also underestimated price dispersion, and our price comparison tool caused them to increase their estimates of dispersion by 68%. The price comparison tool did not cause people to search or apply at more institutions, but it did cause them to be 39% more likely to negotiate with their lender, to receive 13% more offers and 11% lower interest rates, and to be 5% more likely to take out a loan.