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Do nudges reduce borrowing and consumer confusion in the credit card market?
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Adams, Paul, Guttman-Kenney, Benedict, Hayes, Lucy, Hunt, Stefan, Laibson, David and Stewart, Neil Do nudges reduce borrowing and consumer confusion in the credit card market? Economica . (In Press)
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Abstract
We test the effects of two nudges designed to reduce credit card indebtedness; our study uses field experiments on 183,441 UK credit cardholders. All of the nudges have two components: (i) they explain the negative consequences of making only the min- imum required payment and (ii) they recommend and logistically facilitate payments in excess of the minimum required payment. Our first experiment studies nudges that appear on monthly credit card statements. Our second experiment studies letters and email nudges (apart from monthly statements), which are sent to cardholders who have chosen to make automatic minimum payments. Both interventions generate no effect on economic outcomes by the end of our half-year observation period. In a follow-up survey, we find 96% of survey respondents in the control group underestimate the re- payment time generated by making only required minimum payments. The nudges substantially reduce the magnitude of this optimistic bias, but the bias remains over- whelmingly common.
| Item Type: | Journal Article | ||||||||
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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| Journal or Publication Title: | Economica | ||||||||
| Publisher: | Blackwell Publishing | ||||||||
| ISSN: | 0013-0427 | ||||||||
| Dates: |
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| Status: | Peer Reviewed | ||||||||
| Publication Status: | In Press | ||||||||
| Publisher Statement: | This is the peer reviewed version of the following article: [FULL CITE], which has been published in final form at [Link to final article using the DOI]. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
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