Friendship fallout and bailout backlash: The psychology of borrowing and lending

Abstract

Six studies explore the psychology of borrowing and lending. Across two different contexts—friends lending to friends and taxpayers bailing out businesses—lenders are angrier with borrowers who specifically make hedonic (as opposed to utilitarian) purchases with loaned money. This anger is pronounced enough that lenders' negative feelings toward borrowers who made past hedonic (vs. utilitarian) purchases remains even after they have been fully repaid. Undergirding lender anger is deserved oversight—a novel construct capturing people's belief that they deserve control and say over another's decision-making. Borrowers and lenders do not agree on who deserves oversight over how the loaned funds are spent in large part because they differ in how much perceived ownership they each feel over the money. When lenders are yet to be repaid, their desire for oversight extends even to purchases made separately from the loaned amount. Finally, these processes and consequences are most powerful when money is lent compared with other forms of exchange, such as gifting money or being paid for work.