Susan Thorp

We study how gambling behavior responds to prior-day outcomes, liquidity shocks, and bettors' awareness of potential harm, using betting data for a random sample of 24,453 online sports bettors. Relative to days with no resolved bets, bettors are 7 to 8 percentage points more likely to place a bet following either a win or a loss. Bettors increase their stake size after wins and shift toward higher-odds bets after losses. Liquidity windfalls from annual tax refunds do not affect the gambling participation rate, but lead to stake escalation among bettors vulnerable to gambling harm. Safe-gambling tools curb betting only when they directly limit engagement with the platform. Reminder-based awareness nudges, which notify bettors when their gambling expenditure or time spent on the gambling platform exceeds self-set limits, reduce participation but shift bets toward higher-risk wagers.

The family home is the most important asset on household balance sheets, aside from human capital. Choosing a suitable mortgage is therefore critical to financial well-being but households often make costly mistakes. We collect data in an online survey to test borrowers’ comfort with, and understanding of, mortgage debt. We analyze the impact of financial literacy, mortgage broker advice and whether the loan is framed as a lump sum debt or an equivalent stream of repayments. We conjecture that participants’ comfort with loans and their ability to match lump sum debt to equivalent repayment streams will help them to choose a suitable mortgage. Results show that participants with high financial literacy are less comfortable with mortgage debt in general and also less sensitive to framing than those with low financial literacy. Literate participants are better able to match repayment streams with the equivalent lump sums. Endogeneity-controlled regression analysis shows that consulting brokers leads to higher comfort with debt and lower sensitivity to framing. Survey responses also indicate more uncertainty about future house prices among borrowers who intend to consult brokers than among those who do not.

Aging societies need efficient and flexible systems to finance care for the frail elderly. We study pre‐retirees' demand for flexible insurance that can finance informal long‐term care by paying income in poor health states instead of reimbursing formal care costs. We collect and analyze stated preferences for this long‐term care income product, and preferences for informal care. When asked to allocate wealth to a life annuity, a liquid investment and flexible long‐term care insurance, around 75% of our sample of 1008 pre‐retirees choose some long‐term care cover. Study participants treat long‐term care income insurance as a complement to informal care from their families. Females who expect to rely exclusively on extensive care from family members prefer more cover than similar males. We also find that if long‐term care income insurance were available, some healthier seniors would purchase additional longevity insurance, using liquid funds otherwise set aside to self‐insure long‐term care risk.

A timely reminder on an app or website prompts delinquent credit card debtors with strong credit records to repay but is ineffective for debtors with weak credit records. We study field data from a 2015-16 randomized controlled trial of a broadcast reminder received by 30-days-overdue credit card debtors who log into the app or website of their credit provider. On average, the treated debtors were 2.7 percentage points more likely to repay all arrears than debtors in the control group. However, the effect of the repayment reminder depended on the debtor type; the broadcast reminder significantly raised repayment rates of high credit score delinquent debtors but did not significantly raise, and may have lowered, the repayment rate of lower credit score delinquents.

We surveyed 854 current and 147 former members of self-managed superannuation funds (SMSFs) in 2016. The results of our survey document their aspirations, operational practices and experiences. Both current and former members expressed high general interest in superannuation, but ‘detractors’ of SMSFs outnumbered ‘promoters’. SMSF members said they enjoy ‘control’ of investment, but a majority delegated tasks to financial professionals. Three times as many members rated the performance of their fund as above the SMSF average as below, although most did not measure the performance of their fund adequately. The probability of closing a SMSF is significantly higher if members use net returns, rather than other indicators such as account balance, to judge performance. JEL Classification: H55, H75, J32

In 2017 Australian superannuation assets stood at 148 per cent of GDP, or $2.5 trillion in absolute terms. This was the world's fourth largest pool of retirement savings, a remarkable outcome over 25 years of the operation of the Superannuation Guarantee. We survey the local academic, industry and policy literature on the economics of superannuation during the last quarter of a century. Topics include the policy debate, the positive, normative and behavioural economics of household interaction with superannuation, and the structure, conduct and performance of the superannuation industry. We encourage further research into effective tax rates, the need to hedge human capital and the automation of financial advice.

Endowments have been accused of hoarding their wealth. However, the theoretically ideal spending plan remains unclear and, in practice, endowments follow a range of rules. Here we derive and estimate the optimal spending plans of an infinitely lived charity or endowment with an Epstein-Zin-Weil utility function, given general Markovian returns to wealth. We analyse two special cases: first, where spending is a power function of last period’s wealth; and second where the endowment uses ‘payout smoothing’. Via non-linear least squares, we estimate the optimal spending rate and the elasticity of inter-temporal substitution for an endowment with a typical diversified portfolio and for a portfolio of hedge funds. In a new approach, we use maximum entropy methods to characterize the returns distribution of an endowment whose spending plan conforms with the optimality condition. We confirm that the estimated returns distribution is largely consistent with the optimal spending plan.

We quantify the widespread and significant economic impact of first impressions and confirmation bias in the financial advice market. We use a theoretical learning model and new experimental data to measure how these biases can evolve over time and change clients’ willingness to pay advisers. Our model demonstrates that clients’ confirmation bias will reinforce the effect of first impressions. Our results also lend support, in a new financial context, to theoretical models of learning under limited memory where people use unclear signals to confirm and reinforce their current beliefs. We find that almost two thirds of the participants in our experiment make choices that are consistent with a limited memory updating process: they interpret unclear advice to be good advice when it comes from the adviser they prefer. Our results show that models that account for behavioral factors such as confirmation bias may be needed to explain some financial decisions.