A South African consumer lender decided to use a mass mailing of 53,000 loan offers to test the sensitivity of consumers to variations in interest rates and other features of loan offers. The interest rates in the offer letters ranged from 3.75% to 11.75% per month. As expected, the uptake rate (the number of consumers who accepted a particular loan offer) was higher for offer letters with low interest rates. The elasticity of the uptake rate with respect to the interest rate was -0.34: a 10% decrease in the interest rate (from, say, an interest rate of 7.0% to 6.3%) increased the uptake rate by 3.4%.

More surprising was the finding that the uptake rate among men was much higher when the offer letter included a picture of a woman rather than a picture of a man. Replacing a male model with a female model was equivalent to cutting the interest rate by 25 percent, for example, from 7.0 percent to 5.25 percent. In contrast, the uptake rate for women consumers was unaffected by the gender of the model.

Question.

How does advertising affect consumer choices?