Peer learning and financial education

Peer Advice on Financial Decisions: A case of the blind leading the blind?
by Sandro Ambuehl, B. Douglas Bernheim, Fulya Ersoy, Donna Harris – #25034 (PE)

Previous research shows that many people seek financial advice
from non-experts, and that peer interactions influence financial
decisions. We investigate whether such influences are
beneficial, harmful, or simply haphazard. In our laboratory
experiment, face-to-face communication with a randomly assigned
peer significantly improves the quality of private decisions,
measured by subjects’ ability to choose as if they properly
understand their opportunity sets. Subjects do not merely mimic
those who know better, but also make better private decisions in
novel tasks. People with low financial competence experience
greater improvements when their partners also exhibit low
financial competence. Hence, peer-to-peer communication
transmits financial decision-making skills most effectively when
peers are equally uninformed, rather than when an informed
decision maker teaches an uninformed peer. Qualitative analysis
of subjects’ discussions supports this interpretation. The
provision of effective financial education to one member of a
pair influences the nature of communication but does not lead to
additional improvements in the quality of the untreated partner’s
decisions, particularly in novel tasks.

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2 Responses to Peer learning and financial education

  1. Moz of Yarramulla says:

    The rubber duck effect?

    Viz, if you have to explain your options that forces you to think about them, and there’s an implicit pressure to work through and come up with likely consequences. It’s a little hard to say to an actual person “I could do X, or Y. I dunno” and leave it at that.

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