Devin G. Pope

What's in a Picture? Evidence of Discrimination from Prosper.com

We find evidence of significant racial disparities in a new type of credit market known as peer-to-peer lending. Loan listings with blacks in the attached picture are 25 to 35 percent less likely to receive funding than those of whites with similar credit profiles. Despite the higher average interest rates charged to blacks, lenders making such loans earn a lower net return compared to loans made to whites with similar credit profiles because blacks have higher relative default rates. These results provide insight into whether the discrimination we find is taste-based or statistical.

Reacting to rankings: Evidence from “America's Best Hospitals”

Rankings and report cards have become a popular way of providing information in a variety of domains. I estimate the response to rankings in the hospital market and find that hospitals that improve their rank are able to attract significantly more patients. The average hospital in my sample experiences a 5% change in non-emergency, Medicare patient volume from year to year due to rank changes. These findings have implications regarding the competitiveness of hospital markets and the effect that the dissemination of quality information in hospital markets can have on individual choice.

Heuristic Thinking and Limited Attention in the Car Market

Can heuristic information processing affect important product markets? We explore whether the tendency to focus on the left-most digit of a number affects how used car buyers incorporate odometer values in their purchase decisions. Analyzing over 22 million wholesale used-car transactions, we find substantial evidence of this left-digit bias; there are large and discontinuous drops in sale prices at 10,000-mile thresholds in odometer mileage, along with smaller drops at 1,000-mile thresholds. We obtain estimates for the inattention parameter in a simple model of this left-digit bias. We also investigate whether this heuristic behavior is primarily attributable to the final used-car customers or the used-car salesmen who buy cars in the wholesale market. The evidence is most consistent with partial inattention by final customers. We discuss the significance of these results for the literature on inattention and point to other market settings where this type of heuristic thinking may be important. Our results suggest that information-processing heuristics may be important even in markets with large stakes and where information is easy to observe.

Can Losing Lead to Winning

Individuals, groups, and teams who are behind their opponents in competition tend to be more likely to lose. In contrast, we show that through increasing motivation, being slightly behind can actually increase success. Analysis of more than 18,000 professional basketball games illustrates that being slightly behind at halftime leads to a discontinuous increase in winning percentage. Teams behind by a point at halftime, for example, actually win more often than teams ahead by one, or approximately six percentage points more often than expected. This psychological effect is roughly half the size of the proverbial home-team advantage. Analysis of more than 45,000 collegiate basketball games finds consistent, though smaller, results. Experiments corroborate the field data and generalize their findings, providing direct causal evidence that being slightly behind increases effort and casting doubt on alternative explanations for the results. Taken together, these findings illustrate that losing can sometimes lead to winning. This paper was accepted by Peter Wakker, decision analysis.

Round Numbers as Goals Evidence From Baseball, SAT Takers, and the Lab

Where do people’s reference points come from? We conjectured that round numbers in performance scales act as reference points and that individuals exert effort to perform just above rather than just below such numbers. In Study 1, we found that professional baseball players modify their behavior as the season is about to end, seeking to finish with a batting average just above rather than below .300. In Study 2, we found that high school students are more likely to retake the SAT after obtaining a score just below rather than above a round number. In Study 3, we conducted an experiment employing hypothetical scenarios and found that participants reported a greater desire to exert more effort when their performance was just short of rather than just above a round number.

Understanding College Application Decisions: Why College Sports Success Matters

Using a unique, national data set that indicates where students choose to send their SAT scores, the authors find that college sports success has a large impact on student application decisions. For example, a school that has a stellar year in basketball or football on average receives up to 10% more SAT scores. Certain demographic groups (males, Blacks, out-of-state students, and students who played sports in high school) are more likely to be influenced by sports success than their counterparts. The authors explore the reasons why students might be influenced by these sporting events and present evidence that attention/accessibility helps explain these findings.

Improving College Performance and Retention the Easy Way: Unpacking the Act Exam

Colleges rely on the ACT exam in their admission decisions to increase their ability to differentiate between students likely to succeed and those that have a high risk of under-performing and dropping out. We show that two of the four sub tests of the ACT, English and Mathematics, are highly predictive of positive college outcomes while the other two subtests, Science and Reading, provide little or no additional predictive power. This result is robust across various samples, specifications, and outcome measures. We demonstrate that focusing solely on the English and Mathematics test scores greatly enhances the predictive validity of the ACT exam.

When Walmart comes to town: Always low housing prices? Always?

Walmart often faces strong local opposition when trying to build a new store. One common complaint is that Walmart lowers nearby housing prices. In this study we use over one million housing transactions located near 159 Walmarts that opened between 2000 and 2006 to test if the opening of a Walmart lowers housing prices. Using a difference-in-differences specification, our estimates suggest that a new Walmart store actually increases housing prices by between 2% and 3% for houses located within 0.5 miles of the store and by 1–2% for houses located between 0.5 and 1 mile.

Poker superstars: Skill or luck?

The popularity of poker has exploded in recent years. The premier event, the World Series of Poker Main Event, which costs

The Impact of Personal Experience on Behavior: Evidence from Video-Rental Fines

10,000 to enter, has increased from a field of six in 1971 to 839 in 2003 and 5,619 in 2005. Broadcasts of poker tournaments can frequently be found on television stations such as ESPN, Fox Sports, the Travel Channel, Bravo, and the Game Show Network. These tournaments consistently receive high television ratings. Poker also has garnered the attention of many infl uential academics. It served as a key inspiration in the historical development of game theory. John Von Neumann and Oskar Morgenstern claim that their 1944 classic, Theory of Games and Economic Behavior, was motivated by poker. In the text, they described and solved a simplifi ed game of poker. Other famous mathematicians/economists such as Harold Kuhn and John Nash also studied and wrote about poker. For all its popularity and academic interest, the legality of poker playing is in question. In particular, most regulations of gambling in the United States (and other countries) include poker. In the United States, each state has the authority to decide whether it is legal to play poker for money, and the regulations vary signifi cantly. In Indiana, poker for money is legal only at regulated casinos. In Texas, poker for money is legal only in private residences. In Utah, poker for money is not legal at all. The popularity of online poker for money has raised further questions about the right (or ability) of states to regulate this activity. At the national level, the U.S. Department of Justice recently stated that the Federal Wire Act (the Interstate Wire Act) makes online casino games illegal (in addition to sports wagering), although the U.S. Fifth Court of Appeals subsequently ruled that interpretation incorrect. That said, there are heated arguments on both sides of the regulation debate. Those in favor of regulating argue that poker is primarily a game of luck, such as roulette or baccarat, and that it should be regulated in a manner similar to those games. Those in favor of lifting regulations argue that it is primarily a game of skill—a sport such as tennis or golf—and it should not be regulated at all. So, is professional poker a game of luck or skill? Several ‘star’ poker players have repeatedly performed well in high-stakes poker tournaments. While this suggests skill differentials, it is far from conclusive. In how Poker Superstars: Skill or Luck?