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Working Paper
Consumer Mistakes and Advertising : The Case of Mortgage Refinancing
Does advertising help consumers to find the products they need or push them to buy products they don't need? In this paper, we study the effects of advertising on consumer mistakes and quantify the resulting effect on consumer welfare in the market for mortgage refinancing. Mortgage borrowers frequently make costly refinancing mistakes by either refinancing when they should wait, or by waiting when they should refinance. We assemble a novel data set that combines a borrower's exposure to direct mail refinance advertising and their subsequent refinancing decisions. Even though on average ...