Consumer Search Behavior in the Changing Credit Card Market
AbstractThis article investigates whether search costs inhibit consumers from searching for lower credit card interest rates. The results provide evidence that the credit card search environment has changed since the mid-1990s. Using the 2001 Survey of Consumer Finances, we model consumers' propensity to search and their probability of being denied credit simultaneously and find that larger credit card balances induce cardholders to search more even though they face a higher probability of rejection. This result may be related to the high volume of direct solicitation, combined with disclosure requirements, which has lowered the cost of search to find lower interest rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Ohio State University, Department of Economics in its series Working Papers with number 02-03.
Date of creation: Sep 2002
Date of revision:
Contact details of provider:
Postal: 410 Arps Hall 1945 North High Street Columbus, Ohio 43210-1172
Other versions of this item:
- Kerr, Sougata & Dunn, Lucia, 2008. "Consumer Search Behavior in the Changing Credit Card Market," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 345-353.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
- Sandra Black & Donald Morgan, 1998. "Risk and the democratization of credit cards," Research Paper 9815, Federal Reserve Bank of New York.
- Mallar, Charles D, 1977. "The Estimation of Simultaneous Probability Models," Econometrica, Econometric Society, vol. 45(7), pages 1717-22, October.
- Brito, Dagobert L & Hartley, Peter R, 1995. "Consumer Rationality and Credit Cards," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 400-433, April.
- Sangkyun Park, 1997. "Option value of credit lines as an explanation of high credit card rates," Research Paper 9702, Federal Reserve Bank of New York.
- Sougata Kerr & Lucia Dunn & Stephen Cosslett, 2004. "Do Banks Use Private Information from Consumer Accounts? Evidence of Relationship Lending in Credit Card Interest Rate Heterogeneity," Working Papers 04-08, Ohio State University, Department of Economics.
- Sumit Agarwal & John C Driscoll & Xavier Gabaix & David Laibson, 2007.
"The Age of Reason: Financial Decisions Over the Lifecycle,"
122247000000001752, UCLA Department of Economics.
- Xavier Gabaix & John C. Driscoll & David Laibson & Sumit Agarwal, 2008. "The Age of Reason: Financial Decisions Over the Lifecycle," 2008 Meeting Papers 322, Society for Economic Dynamics.
- Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2007. "The age of reason: financial decisions over the lifecycle," Working Paper Series WP-07-05, Federal Reserve Bank of Chicago.
- Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2007. "The Age of Reason: Financial Decisions Over the Lifecycle," NBER Working Papers 13191, National Bureau of Economic Research, Inc.
- Paul S. Calem & Michael B. Gordy & Loretta J. Mester, 2005.
"Switching costs and adverse selection in the market for credit cards: new evidence,"
05-16, Federal Reserve Bank of Philadelphia.
- Calem, Paul S. & Gordy, Michael B. & Mester, Loretta J., 2006. "Switching costs and adverse selection in the market for credit cards: New evidence," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1653-1685, June.
- Tufan Ekici & Lucia Dunn, 2010.
"Credit card debt and consumption: evidence from household-level data,"
Taylor and Francis Journals, vol. 42(4), pages 455-462.
- Lucia Dunn & Tufan Ekici, 2006. "Credit Card Debt and Consumption: Evidence from Household-Level Data," Working Papers 06-01, Ohio State University, Department of Economics.
- Berg, Nathan & Kim, Jeong-Yoo, 2010. "Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption," MPRA Paper 26593, University Library of Munich, Germany.
- Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2008.
"Learning in the Credit Card Market,"
NBER Working Papers
13822, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John Slaughter).
If references are entirely missing, you can add them using this form.