St Aubyn, Carolyn (2022) Consumer choices with wealth preferences and separation of consumption and payment. Working Paper. Birkbeck Centre for Applied Macroeconomics, London, UK.
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Abstract
This paper presents a consumer choice model in which both consumption and wealth are valued. The assumption on wealth can help explain observed costly consumer choices such as paying charges for late settlement of bills, and credit card debt costs. The paper addresses one such costly choice puzzle - the credit card debt, or co-holding, puzzle where cash and credit card debt are simultaneously held. An empirical analysis gives a new perspective on the extent of this puzzle and the model shows, theoretically, how including preferences for wealth can help explain the co-holding by individuals with very high levels of liquidity whose behaviour is thus hard to explain with existing theories for co-holding. The model also has implications for optimal demand levels in payment set-ups where payment is delayed, such as such as the rapidly growing Buy Now, Pay Later financing.
Metadata
| Item Type: | Monograph (Working Paper) |
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| Additional Information: | BCAM Working Paper #2201. ISSN: 1745-8587 |
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Research Centres and Institutes: | Applied Macroeconomics, Birkbeck Centre for |
| Depositing User: | Isobel Edwards |
| Date Deposited: | 25 Mar 2022 13:54 |
| Last Modified: | 02 Aug 2023 18:15 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/47456 |
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