Do consumers choose the right credit contracts?
- We find that on average consumers chose the contract that ex post minimized their net costs. A substantial fraction of consumers (about 40%) still chose the ex post sub-optimal contract, with some incurring hundreds of dollars of avoidable interest costs. Nonetheless, the probability of choosing the sub-optimal contract declines with the dollar magnitude of the potential error, and consumers with larger errors were more likely to subsequently switch to the optimal contract. Thus most of the errors appear not to have been very costly, with the exception that a small minority of consumers persists in holding substantially sub-optimal contracts without switching. Klassifikation: G11, G21, E21, E51
Author: | Sumit Agarwal, Souphala Chomsisengphet, Chunlin Liu, Nicholas S. Souleles |
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URN: | urn:nbn:de:hebis:30-23443 |
Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,32 |
Series (Serial Number): | CFS working paper series (2005, 32) |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2005 |
Year of first Publication: | 2005 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2005/12/20 |
Tag: | Banking; Borrowing; Consumer Credit; Consumer Finance; Consumption-Saving; Credit Cards |
GND Keyword: | Verbrauch; Sparen; Konsumentenkredit; Kreditkarte |
HeBIS-PPN: | 19717244X |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Deutsches Urheberrecht |