Information Disclosure and Demand Elasticity of Financial Products: Evidence from a Multi-Country Study
This study seeks to understand the role of information disclosure formats in facilitating comparison shopping for savings and credit products by low-income consumers in Peru and Mexico. These countries were chosen because they both have similar levels of financial access but have de jure regulations with different transparency requirements. According to the market conduct index published by the Economist Intelligence Unit’s 2014 Global Microscope Index and Report, Peru is ranked second while Mexico is ranked 25th (middle of the sample of countries).
The researchers implemented a laboratory experiment in which low-income consumers were assigned a profile and then incentivized to choose the product that best fit their needs from among 5 or 10 products. In each round of decision-making, information about the products was presented in a different format, including current marketing materials gathered from financial institutions during sales visits by actual consumers and a simplified key facts statement (KFS) designed using behavioral insights to facilitate comparison shopping. The results show that the simplified KFS with its standardized format significantly improves consumer decision-making compared to the marketing materials currently provided by financial institutions. The effects are however much stronger for credit than savings products.
This paper contributes to the literature in household finance and other fields that study the impact of disclosure regulations in various consumer markets.