Present-Biased Preferences and Credit Card Borrowing

Meier, Stephan; Sprenger, Charles

doi:10.1257/app.2.1.193

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American Economic Journal: Applied Economics: Vol. 2 No. 1 (January 2010)

AEJ: Applied Volume. 2, Issue 1 | left

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Present-Biased Preferences and Credit Card Borrowing

Article Citation

Meier, Stephan, and Charles Sprenger. 2010. "Present-Biased Preferences and Credit Card Borrowing." American Economic Journal: Applied Economics, 2(1): 193-210.

DOI: 10.1257/app.2.1.193

Abstract

Some individuals borrow extensively on their credit cards. This paper tests whether present-biased time preferences correlate with credit card borrowing. In a field study, we elicit individual time preferences with incentivized choice experiments, and match resulting time preference measures to individual credit reports and annual tax returns. The results indicate that present-biased individuals are more likely to have credit card debt, and to have significantly higher amounts of credit card debt, controlling for disposable income, other socio-demographics, and credit constraints. (JEL D12, D14, D91)

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Authors

Meier, Stephan (Columbia U)
Sprenger, Charles (U CA, San Diego)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
D14: Personal Finance
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving

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