Justin R. Sydnor

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.

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.

Is high-Quality Production Location-Specific? Evidence from the Automobile Industry

A large literature has documented substantial heterogeneity in the performance of similar firms within industries, but what are the sources of that heterogeneity? In this paper we investigate one potential source of differential performance, the role of location-specific factors, including the quality and attitudes of the local workforce, the type of supplier networks, the education system, the institutional infrastructure, and local “culture.” We focus on the automobile industry and in particular the role that location-specific factors play in determining the quality of automobile production. We exploit the natural experiment provided by the establishment of assembly plants in the U.S. by Japanese auto manufacturers. A number of the most popular Japanese car models are assembled both in Japanese plants and U.S. plants. We use a unique data set of over 400,000 used-car transactions at wholesale auctions to test whether the long-run quality of otherwise identical cars depends on the country of assembly. Japanese-assembled cars sell for a modest

Over)insuring Modest Risks

50 more on average and other measures of quality also show small or no differences. The finding that American plants can produce high quality (Japanese) cars suggests that there is not an inherent limitation to the U.S. manufacturing environment and that the sources of heterogeneity in quality automobile production are likely dominated by firm-specific rather than location-specific factors.