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Peer Advice on Financial Decisions: A Case of the Blind Leading the Blind?

Author

Listed:
  • Sandro Ambuehl

    (University of Zurich)

  • B. Douglas Bernheim

    (Stanford University)

  • Fulya Ersoy

    (University of Chicago)

  • Donna Harris

    (University of Oxford)

Abstract

We investigate the impact of peer interaction on the quality of financial decision making in a laboratory experiment. Face-to-face communication with a randomly assigned peer significantly improves the quality of subsequent private decisions even though simple mimicry would have the opposite effect. We present evidence that the mechanism involves general conceptual learning (because the benefits of communication extend to previously unseen tasks), and that the most effective learning relationships are horizontal rather than vertical (because people with weak skills benefit most when their partners also have weak skills). The benefits of demonstrably effective financial education do not propagate to peers.

Suggested Citation

  • Sandro Ambuehl & B. Douglas Bernheim & Fulya Ersoy & Donna Harris, 2025. "Peer Advice on Financial Decisions: A Case of the Blind Leading the Blind?," The Review of Economics and Statistics, MIT Press, vol. 107(1), pages 240-255, January.
    • Handle: RePEc:tpr:restat:v:107:y:2025:i:1:p:240-255
    DOI: 10.1162/rest_a_01269
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    Cited by:

    1. is not listed on IDEAS
    2. Sholevar, Maryam & Harris, Laurence, 2019. "Mind the gap: A discussion paper on Financial Literacy, Financial behaviour and Financial Education : Is there any Gender Gap?," OSF Preprints b7zd6, Center for Open Science.
    3. Armande Mahabi Nabami & Anaëlle Petre & Roy Mersland, 2024. "Impact of climate change training intervention in savings groups," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(4), pages 2047-2062, May.
    4. Darya Korlyakova, 2021. "Learning about Ethnic Discrimination from Different Information Sources," CERGE-EI Working Papers wp689, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. repec:osf:osfxxx:b7zd6_v1 is not listed on IDEAS
    6. Glenn W. Harrison, 2019. "The behavioral welfare economics of insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(2), pages 137-175, September.
    7. Montero, Maria & Sheth, Jesal D., 2021. "Naivety about hidden information: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 92-116.
    8. Jonathan Huntley & Valentina Michelangeli & Felix Reichling, 2021. "What drives investors to chase returns?," Temi di discussione (Economic working papers) 1334, Bank of Italy, Economic Research and International Relations Area.
    9. Balakina, Olga & Bäckman, Claes & Hackethal, Andreas & Hanspal, Tobin & Lammer, Dominique Marcel, 2022. "Good peers, good apples? Peer effects in portfolio quality," SAFE Working Paper Series 353, Leibniz Institute for Financial Research SAFE.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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