The Luxury of Rounding: Heuristics and Private Information
Publication Date
1-16-2026
Abstract
We study how deviations from commonly used decision heuristics can reveal economically meaningful private information. In our empirical setting of loan-amount choices on a major FinTech platform, borrowers' non-round choices predict credit risk beyond standard observables. Using unique field data, a stylized model, a quasi-experimental policy shock, and a laboratory experiment, we identify a mechanism in which tighter financial constraints raise the marginal value of precision, giving borrowers stronger incentives to deviate from the round-number heuristic. These borrowers experience worse repayment outcomes, yet this information is not reflected in platform-set rates, exposing retail investors to disproportionate risk.
Document Type
Article
Keywords
Behavioral Heuristics, Private Information, Consumer Credit, Financial Constraints
Disciplines
Finance
Source
SMU Cox: Finance (Topic)
Language
English
