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Adverse Selection Search Costs And Sticky Credit Card Rates
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Book Synopsis Adverse Selection, Search Costs and Sticky Credit Card Rates by : O. Felix Ayadi
Download or read book Adverse Selection, Search Costs and Sticky Credit Card Rates written by O. Felix Ayadi and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Several scholars of financial economics observed that during the 1980s, market interest rates declined continuously with little or no impact on credit card rates. Recently, Meyercord (1994), Sinkey and Nash (1993) and Sullivan and Worden (1995) recorded significant changes in the credit card market indicating an increased level of competition. This study represents an attempt to determine the sensitivity of credit card rates to the costs of funds in the U.S. economy. The evidence from the Johansen Cointegration test confirms that credit card rates and cost of funds possess a long-run equilibrium relationship with one another. Furthermore, the results of the error correction models are indicative of a sluggish rate at which credit card interest rates adjust to the costs of funds. Between 1982 and 1994, credit card rates adjust to changes in the cost of funds at about 15 percent per quarter. These results represent anecdotal evidence for the validity of adverse selection, search and switch costs explanations that have been discussed in the financial contracting literature.
Book Synopsis Imperfect Information, Adverse Selection and Interest Rate Sluggishness in the Pricing of Bank Credit Cards by : J. Michael Woolley
Download or read book Imperfect Information, Adverse Selection and Interest Rate Sluggishness in the Pricing of Bank Credit Cards written by J. Michael Woolley and published by . This book was released on 1988 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financial Literacy and the Limits of Financial Decision-Making by : Tina Harrison
Download or read book Financial Literacy and the Limits of Financial Decision-Making written by Tina Harrison and published by Springer. This book was released on 2016-09-20 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents selected papers on the factors that serve to influence an individual’s capacity in financial decision-making. Initial chapters provide an overview of the cognitive factors affecting financial decisions and suggest a link between limited cognitive capacity and the need for financial education. The book then expands on these cognitive limitations to explore the tendency for overconfidence in decision-making and the interplay between rational and irrational factors. Later contributions show how credit card companies benefit from limitations in consumer financial literacy, how gender and cognition intersect to play an important role in financial decision-making, and how to improve financial capacity through financial literacy and education campaigns, including those addressing developed marketplaces. This comprehensive collection of papers will be of value to all readers who seek to better understand the multi-factorial and complex nature of personal financial management in today’s economic climate.
Book Synopsis Search, Switching Costs and the Stickiness of Credit Card Interest Rates by : Paul S. Calem
Download or read book Search, Switching Costs and the Stickiness of Credit Card Interest Rates written by Paul S. Calem and published by . This book was released on 1992 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Economics of Credit Cards, Debit Cards and ATMs by :
Download or read book The Economics of Credit Cards, Debit Cards and ATMs written by and published by Fundacion BBVA. This book was released on with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Consumer Credit and the American Economy by : Thomas A. Durkin
Download or read book Consumer Credit and the American Economy written by Thomas A. Durkin and published by . This book was released on 2014 with total page 737 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consumer Credit and the American Economy examines the economics, behavioral science, sociology, history, institutions, law, and regulation of consumer credit in the United States. After discussing the origins and various kinds of consumer credit available in today's marketplace, this book reviews at some length the long run growth of consumer credit to explore the widely held belief that somehow consumer credit has risen "too fast for too long." It then turns to demand and supply with chapters discussing neoclassical theories of demand, new behavioral economics, and evidence on production costs and why consumer credit might seem expensive compared to some other kinds of credit like government finance. This discussion includes review of the economics of risk management and funding sources, as well discussion of the economic theory of why some people might be limited in their credit search, the phenomenon of credit rationing. This examination includes review of issues of risk management through mathematical methods of borrower screening known as credit scoring and financial market sources of funding for offerings of consumer credit. The book then discusses technological change in credit granting. It examines how modern automated information systems called credit reporting agencies, or more popularly "credit bureaus," reduce the costs of information acquisition and permit greater credit availability at less cost. This discussion is followed by examination of the logical offspring of technology, the ubiquitous credit card that permits consumers access to both payments and credit services worldwide virtually instantly. After a chapter on institutions that have arisen to supply credit to individuals for whom mainstream credit is often unavailable, including "payday loans" and other small dollar sources of loans, discussion turns to legal structure and the regulation of consumer credit. There are separate chapters on the theories behind the two main thrusts of federal regulation to this point, fairness for all and financial disclosure. Following these chapters, there is another on state regulation that has long focused on marketplace access and pricing. Before a final concluding chapter, another chapter focuses on two noncredit marketplace products that are closely related to credit. The first of them, debt protection including credit insurance and other forms of credit protection, is economically a complement. The second product, consumer leasing, is a substitute for credit use in many situations, especially involving acquisition of automobiles. This chapter is followed by a full review of consumer bankruptcy, what happens in the worst of cases when consumers find themselves unable to repay their loans. Because of the importance of consumer credit in consumers' financial affairs, the intended audience includes anyone interested in these issues, not only specialists who spend much of their time focused on them. For this reason, the authors have carefully avoided academic jargon and the mathematics that is the modern language of economics. It also examines the psychological, sociological, historical, and especially legal traditions that go into fully understanding what has led to the demand for consumer credit and to what the markets and institutions that provide these products have become today.
Book Synopsis Switching Costs and Adverse Selection in the Market for Credit Cards by : Paul S. Calem
Download or read book Switching Costs and Adverse Selection in the Market for Credit Cards written by Paul S. Calem and published by . This book was released on 2019 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: To explain persistence of credit card interest rates at relatively high levels, Calem and Mester (AER, 1995) argued that informational barriers create switching costs for high-balance customers. As evidence, using data from the 1989 Survey of Consumer Finances, they showed that these households were more likely to be rejected when applying for new credit. In this paper, they revisit the question using the 1998 and 2001 SCF. Further, they use new information on card interest rates to test for pricing effects consistent with information-based switching costs. The authors find that informational barriers to competition persist, although their role may have declined.
Book Synopsis The Economics of Consumer Credit by : Giuseppe Bertola
Download or read book The Economics of Consumer Credit written by Giuseppe Bertola and published by MIT Press. This book was released on 2006 with total page 389 pages. Available in PDF, EPUB and Kindle. Book excerpt: Cross-national analysis of empirical, theoretical, and policy issues in the consumer credit industry, including household debt, credit card usage, and bankruptcy.
Book Synopsis Analyzing the Economics of Financial Market Infrastructures by : Diehl, Martin
Download or read book Analyzing the Economics of Financial Market Infrastructures written by Diehl, Martin and published by IGI Global. This book was released on 2015-08-17 with total page 439 pages. Available in PDF, EPUB and Kindle. Book excerpt: The prosperity and stability of any economic structure is reliant upon a foundation of secure systems that regulate the movement of money across the globe. These structures have become an integral part of contemporary society by reducing monetary risk and increasing financial security. Analyzing the Economics of Financial Market Infrastructures is a pivotal reference source for the latest scholarly research on the current developments in financial systems and how these processes are evolving due to new regulations and technical advances. Featuring extensive coverage on a range of relevant topics on payment systems, central securities depositories, central counterparties, and trade repositories, this book is an essential reference source for professionals in the financial sector, analysts, IT professionals, and academicians concerned with emerging research on financial markets. This book features timely, research-based chapters on a variety of crucial topics including, but not limited to, payment timing, multi-layer networks, transaction simulations, payment system analysis, and regulation of financial marketplaces.
Book Synopsis Consumer Rationality and Credit Card Pricing by : Sangkyun Park
Download or read book Consumer Rationality and Credit Card Pricing written by Sangkyun Park and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: An option is embedded in credit cards. Cardholders with fixed-term credit lines borrow more when they become riskier. This option value raises the zero-profit card rate. Furthermore, the card rate can stay even higher than the zero-profit rate when cardholders are better informed about the probability of becoming riskier in the future. The expected gain from obtaining a credit card is more sensitive to the card rate for borrowers who are more likely to become riskier in the future. Those borrowers expect to use more credit card loans and save more on interest costs. Thus, unilaterally lowering the card rate causes adverse selection, which limits rate competition.lt;brgt;lt;brgt;Pricing the option value with an up-front fee is not a good alternative because the up-front fee is also vulnerable to adverse selection. Borrowers with a higher probability of becoming riskier in the future are more likely to obtain a card charging an up-front fee instead of a high card rate. If a borrower becomes riskier, he/she saves more from a fee card that offers a lower rate. Thus, the attractiveness of fee cards increases with the probability of becoming riskier.lt;brgt;lt;brgt;A low introductory card rate (teaser rate) is an effective way to avoid the adverse selection problem when asymmetric information is mainly about the future-period, as opposed to the present-period, riskiness of borrowers. Since the low introductory rate does not apply in the future, it does not favor borrowers who are more likely to become riskier in the future. The model focusing on the option value of credit lines, therefore, is capable of explaining high card rates and high cardissuers' profits without relying on consumer irrationality and consistent with the prevalence of teaser rates and the reduced profits of cardissuers in recent years.
Book Synopsis Essays on Asset Securitization, Bank Production Costs, and the Credit Card Market by : Hyun Jin Lee
Download or read book Essays on Asset Securitization, Bank Production Costs, and the Credit Card Market written by Hyun Jin Lee and published by . This book was released on 2003 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Switching Costs and Adverse Selection in the Market for Credit Cards by : Paul S. Calem
Download or read book Switching Costs and Adverse Selection in the Market for Credit Cards written by Paul S. Calem and published by . This book was released on 2005 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Household Credit Usage by : B. W. Ambrose
Download or read book Household Credit Usage written by B. W. Ambrose and published by Springer. This book was released on 2007-10-29 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: In response to growing interest in household finance, this collection of essays with a foreword by John Y. Campbell, studies household and consumer use of credit instruments. It shows how individual consumers and households utilize various credit alternatives in managing their consumption and savings and suggests areas for future research.
Book Synopsis Switching Costs and Adverse Selection in the Market for Credit Cards by : Paul S. Calem
Download or read book Switching Costs and Adverse Selection in the Market for Credit Cards written by Paul S. Calem and published by . This book was released on 2005 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Economic Papers written by and published by . This book was released on 2004 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Bulletin written by and published by . This book was released on 2001 with total page 906 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Contemporary Issues in Financial Institutions and Markets by : Barbara Casu
Download or read book Contemporary Issues in Financial Institutions and Markets written by Barbara Casu and published by Routledge. This book was released on 2018-03-08 with total page 153 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this book is to bring academic work on contemporary issues in financial institutions and markets. The general theme is designed to allow for a wide range of topics covering the diverse nature of academic research in banking and finance. As a consequence the contributions cover a wide range of issues across a broad spectrum, including: bank business models, bank competition and stability, credit card pricing and risk; bank supervision; and international investments. This book was originally published as a special issue of The European Journal of Finance.
