NICHOLAS HERZOG
Selected Abstracts
Debt Management
Herzog, Nicholas R., and Daniel M. Bartels, “Misestimating Credit Card Balances: The Effect of Right-Digit Recall Errors on Spending Decisions," Job Market Paper, Under Review at the Journal of Marketing Research
Many consumers use online apps to periodically monitor their bank and credit card balances. In this project, we examine how previously observed balances influence consumers’ estimates of their debts and available resources, and their spending decisions. Consumers are more likely to underestimate their credit card debt and continue spending if they last observed a balance just under (vs. over) the closest multiple of $1,000. We find that accurate recall of the leftmost digit and inaccurate recall of right digits can account for this effect. Further, we distinguish this memory-based mechanism from other prominent perception-based theories of left-digit bias. Although right digits are more likely to be misestimated than left digits in general, consumers have a better memory for right digits when they observe their balances alongside nearby reference points, like close credit limits. Together, these findings offer insights into how aware consumers are of their finances, when consumers are more at risk of underestimating their debts and overspending, and the influence of right-digit recall errors on consumer decision making.
Herzog, Nicholas R., Daniel M. Bartels, and Abigail B. Sussman, “Anchors or Targets? An Examination of Focal Values on Credit Card Statements,” Invited Revision at the Journal of Marketing Research
Credit card statements highlight specific amounts that cardholders can repay, like the minimum payment, statement balance, and the amount needed to pay off the statement balance in three years. Prior research suggests that these focal payment amounts operate as anchors from which cardholders adjust to determine their payments. The authors examined reactions to these values and distributions of payments across six experiments and in credit card data from a large commercial bank. The observed patterns suggest that consumers treat focal payment amounts on credit card statements as targets rather than anchors. Although targets and anchors may seem similar, they are psychologically distinct. Most notably, targets have motivational properties, where an outcome on one side of a target is disproportionately preferred to an outcome on the other side of a target, whereas anchors act as motivationally-neutral starting points for judgments. Focal payment amounts that are too low can leave cardholders feeling more satisfied with smaller payments, which may be costly in the long run, while focal payment amounts that are too high can be demotivating. A better understanding of how cardholders respond to these values can help credit providers structure statements to improve consumer well-being.
Anchors vs. Targets
In this paper, we provide a framework for conceptualizing and identifying differences between anchors and targets (i.e., non-status quo reference points). While these two types of values are often treated interchangeably by academic audiences, they recruit meaningfully different psychological responses. Critically, targets take on properties of goals and carry motivational weight. People aim to reach or surpass a target, exerting extra effort to shift from an outcome below the target to one at or above it. In contrast, anchors act as motivationally inert starting points for subsequent judgments. Although people’s judgments are biased in the direction of anchors, they are not especially likely to move their judgment from one side of an anchor to the other. This distinction can lead to meaningful differences in understanding and generalizing results of one process versus the other. We introduce a new and easy to use approach for classifying values as anchors or targets based on satisfaction ratings accompanied by distributional properties of responses. We present a meta-analysis of this technique applied to existing literature, examining values that are presumed to act as either anchors or targets.
Moral Judgment
Despite the well-documented costs of word–deed misalignment, hypocrisy permeates our personal, professional, and political lives. Why? We explore one potential explanation: the costs of moral flexibility can outweigh the costs of hypocrisy, making hypocritical moral absolutism a preferred social strategy to admissions of moral nuance. We study this phenomenon in the context of honesty. Across six studies (total N = 3545), we find that communicators who take flexible honesty stances (“It is sometimes okay to lie”) that align with their behavior are penalized more than hypocritical communicators who take absolute honesty stances (“It is never okay to lie”) that they fail to uphold. Although few people take absolute stances against deception themselves, they are more trusting of communicators who take absolute honesty stances, relative to flexible honesty stances, because they perceive absolute stances as reliable signals of communicators’ likelihood of engaging in future honesty, regardless of inconsistent behavior. Importantly, communicators—including U.S. government officials—also anticipate the costs of flexibility. This research deepens our understanding of the psychology of honesty and helps explain the persistence of hypocrisy in our social world.