Present-Biased Preferences and Credit Card Borrowing

American Economic Journal, Vol. 2, No. 1, pp. 193-210, 2010

18 Pages Posted: 31 Oct 2011

See all articles by Stephan Meier

Stephan Meier

Federal Reserve Bank of Boston; IZA Institute of Labor Economics; Columbia University - Columbia Business School, Management

Charles Sprenger

University of California, San Diego (UCSD)

Multiple version iconThere are 2 versions of this paper

Date Written: 2010

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 Classification: D12, D14, D91

Suggested Citation

Meier, Stephan and Sprenger, Charles, Present-Biased Preferences and Credit Card Borrowing (2010). American Economic Journal, Vol. 2, No. 1, pp. 193-210, 2010, Available at SSRN: https://ssrn.com/abstract=1951644

Stephan Meier (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Columbia University - Columbia Business School, Management ( email )

3022 Broadway
New York, NY 10027
United States

Charles Sprenger

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

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