Jeremy Burke

Primetime Spin: Media Bias and Belief Confirming Information

This paper develops a model of media bias in which rational agents acquire all their news from the source that is most likely to confirm their prior beliefs. Despite only wishing to make the correct decision, agents act as if they enjoy receiving news that supports their preconceptions. By exclusively gathering information from a source biased towards his prior, there is little chance an agent will be persuaded to change his mind. Moreover, it is shown that even an unbiased agent prefers to receive biased news as it is unlikely to produce conflicting reports. The media caters to the informational demands of consumers and accordingly slants its reporting. It is shown that competition may not decrease bias, but may actually enhance it. Finally, even when it increases bias, competition may improve welfare by expanding the market for news.

Information Acquisition in Competitive Markets: An Application to the US Mortgage Market

How do price commitments impact the amount of information firms acquire about potential customers? We examine this question in the context of a competitive market where firms search for information that may disqualify applicants. Contracts are incomplete because the amount of information acquired cannot be observed. Despite competition, we find that firms search for too much information in equilibrium. If price discrimination is prohibited, members of high-risk groups suffer disproportionately high rejection rates. If rejected applicants remain in the market, the resulting adverse selection can be severe. We apply the results to the US mortgage market. (JEL D82, D83, D86, G21)

Soft versus Hard Commitments A Test on Savings Behaviors

Many Americans save too little, leaving them vulnerable to unexpected financial shocks. Finding ways to help Americans develop emergency savings funds could greatly improve welfare. A wealth of previous literature has demonstrated the central roles played by patience and self-control in achieving sufficient savings. When people lack patience or self-control, welldesigned interventions may help improve financial stability. Increasingly, interventions intended to improve savings behavior have taken the form of externally restricted accounts such as ‘commitment accounts’ that include hefty fees for early withdrawal or that disallow withdrawals altogether for a pre-specified time. Yet, such hard commitment accounts may not appeal to impatient individuals, those who do not anticipate their own self-control problems, or to the poor for whom restrictions on scarce funds can be particularly painful. We test a new ‘soft’ commitment account that asks borrowers to think about their savings goals, how it would feel to achieve them, and make a pledge to work towards these goals (potentially increasing one’s intrinsic motivation), yet has no external restrictions on savings behavior. In a six-month randomized savings experiment we find that such soft commitments can significantly increase amounts saved on day one relative to either a hard commitment account (with external restrictions on withdrawals) or a traditional savings account. Additionally, the soft commitments significantly increased final savings balances relative to no form of commitment and were particularly effective for impatient individuals. However, despite the inherent illiquidity, the hard commitment account proved most effective in building savings balances amongst our participants at the end of six months. 1 Corresponding Author, email: jluoto@rand.org. We gratefully acknowledge financial support from the Roybal Center for Financial Decisionmaking. All errors are our own.

Financial Literacy, Social Perception and Strategic Default

As a result of sustained housing market fragility, a growing number of borrowers are walking away from their underwater homes even though they have the ability to pay. Despite recent advances, questions remain about what influences this decision. In this paper, the authors use survey data to examine the role of social expectations, financial literacy and knowledge of default consequences. They find that homeowners who believe that others are likely to strategically default in the future are more willing to walk away as they anticipate reduced social stigma. Financially literate borrowers appear better able to calculate the benefits of strategically defaulting and are more willing to walk away at high levels of shortfall. They also find evidence that those who better understand the consequences of default, particularly that a defaults impact on ones credit score weakens over time, have a higher willingness to walk away. Their results suggest that policies that help shape expectations about future strategic defaults may influence present foreclosures.

Unfairly Balanced: Unbiased News Coverage and Information Loss

A majority of Americans view news organizations as politically biased, creating a strong incentive for firms to try to present themselves as impartial. This paper argues that the desire to appear unbiased leads to information loss. In the formal model, firms withhold information in an effort to appear neutral. It is shown that information loss is exacerbated by competition and that policies regulating the size of the market can increase the amount of information revealed. Finally, the introduction of imperfectly informed sources of news, such as blogs, can decrease the incentives for traditional news outlets to provide information, yet they may also enhance welfare when information is being suppressed.

Development of a K–12 Financial Education Curriculum Assessment Rubric

To help school district leaders and teachers make informed decisions about the adoption and use of appropriate K–12 financial education curricula, RAND researchers document the current state of the literature and advance a set of criteria for assessing the content, utility, quality, and efficacy of the curricula.

A Tool for Reviewing K–12 Financial Education Curricula

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is non-profit, nonpartisan, and committed to the public interest. RANDs publications do not necessarily reflect the opinions of its research clients and sponsors. A bewildering array of curricula and materials is available to support K–12 financial education. To help educators think about which curriculum to use, the RAND Corporation has developed this tool for reviewing financial education curricula. Introduction T odays students are expected to be prepared to manage their finances in just a few short years. To help them prepare for this responsibility, states and localities are encouraging financial education instruction in K–12 education. A bewildering array of curricula and materials is available to support K–12 financial education—more than 85 curricula were available as of 2014. To help teachers and education leaders think about which curriculum to use, and to better understand the strengths and gaps in the curriculum currently being used, the RAND Corporation has developed this tool for reviewing financial education curricula. This guide is designed for teachers and others who might need a straightforward tool that can be used without substantial training and time. It is based on a much more detailed review rubric, the Complete Rubric for Reviewing Financial Education Curricula, which can be used when time and resources permit a full and complete review. 1 For example, if state education leaders wish to develop a list of financial education curricula to recommend to schools and districts, they might assemble a panel of teachers and researchers to review the existing curricula using the full rubric. Similarly, curriculum providers might want to review their own curricula using the full rubric, to consider areas of strength and areas for further development. Both this tool and the complete rubric in the full companion report draw on extensive reviews of the …

Defaulting In and Cashing Out? The Impact of Retirement Plan Design on the Savings Accumulation of Separating Employees

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