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The goal gradient effect and repayments in consumer credit

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  • Lukas, Moritz

Abstract

Based on a unique dataset, I show that repayments in consumer credit increase with the proximity of a borrower’s current debt level to the debt level with the next lower leftmost digit. This behavior is consistent with the goal gradient effect. The effect is only observed for borrowers who have not committed to monthly minimum repayments.

Suggested Citation

  • Lukas, Moritz, 2018. "The goal gradient effect and repayments in consumer credit," Economics Letters, Elsevier, vol. 171(C), pages 208-210.
    • Handle: RePEc:eee:ecolet:v:171:y:2018:i:c:p:208-210
    DOI: 10.1016/j.econlet.2018.06.025
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    References listed on IDEAS

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    1. Nicola Lacetera & Devin G. Pope & Justin R. Sydnor, 2012. "Heuristic Thinking and Limited Attention in the Car Market," American Economic Review, American Economic Association, vol. 102(5), pages 2206-2236, August.
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    Cited by:

    1. Nigam, Achint & Dewani, Prem & Behl, Abhishek & Pereira, Vijay, 2022. "Consumer’s response to conditional promotions in retailing: An empirical inquiry," Journal of Business Research, Elsevier, vol. 144(C), pages 751-763.

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