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Rational exuberance at the mall: addiction to carrying a credit card balance

  • Kaili Shen
  • David Giles

The Becker-Murphy model of rational addiction is tested with New Zealand credit card debt data. The results clearly favour the rational addiction model over the myopic, backward-looking model. The estimated short-run and long-run price elasticities are -0.58 and -2.32 respectively, and the estimated rate of time-preference is 6.7% per quarter.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 5 ()
Pages: 587-592

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Handle: RePEc:taf:applec:v:38:y:2006:i:5:p:587-592
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