Present-Biased Preferences and Credit Card Borrowing
Coauthor(s): Charles Sprenger.
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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.
Source: American Economic Journal
Meier, Stephan, and Charles Sprenger. "Present-Biased Preferences and Credit Card Borrowing." American Economic Journal 2, no. 1 (2010): 193-210.