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Shin, Faith, Cohen, Dov, Lawless, Robert M. and Preston, Jesse L. (2020) The hedonics of debt. Frontiers in Psychology, 11 . 537606. doi:10.3389/fpsyg.2020.537606 ISSN 1664-1078.
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Official URL: http://dx.doi.org/10.3389/fpsyg.2020.537606
Abstract
Psychologists and economists often discuss the “pain” of paying for our purchases. Four experiments examine how people evaluate prospective debt payments, analyzing how different features of a loan (down payment, final payment, duration, monthly payments) affect willingness to accept the loan. Akin to previous findings on physical pain, participants exhibited duration neglect and overweighted final moments. However, participants also focused heavily on the monthly or average payment (unlike in retrospective studies of physical pain where only peak-end moments seem to count). In Experiment 2, participants’ willingness to accept the loan was not significantly diminished by making it more expensive through keeping the same monthly payment but extending the length of the loan by 40% (evincing duration neglect). Further, in Experiments 3 and 4, we show that participants increased their willingness to buy if loans were made longer and more expensive by adding smaller, less “painful” payments to the end.
Item Type: | Journal Article | ||||||||
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Subjects: | B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HF Commerce H Social Sciences > HG Finance |
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Divisions: | Faculty of Science, Engineering and Medicine > Science > Psychology | ||||||||
Library of Congress Subject Headings (LCSH): | Debt -- Psychological aspects , Finance, Personal -- Decision making -- Psychological aspects, Credit -- Decision making -- Psychological aspects, Decision making, Willingness to pay , Consumer credit | ||||||||
Journal or Publication Title: | Frontiers in Psychology | ||||||||
Publisher: | Frontiers Research Foundation | ||||||||
ISSN: | 1664-1078 | ||||||||
Official Date: | 17 November 2020 | ||||||||
Dates: |
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Volume: | 11 | ||||||||
Number of Pages: | 16 | ||||||||
Article Number: | 537606 | ||||||||
DOI: | 10.3389/fpsyg.2020.537606 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 23 May 2022 | ||||||||
Date of first compliant Open Access: | 23 May 2022 | ||||||||
Is Part Of: | 1 |
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