Edited by Joshua C. Teitelbaum and Kathryn Zeiler
Chapter 4: Balancing act: new evidence and a discussion of the theory on the rationality and behavioral anomalies of choice in credit markets
An emerging literature explores how people choose between and use forms of consumer credit. In their chapter, Bos, Carter, and Skiba reflect on the existing literature that analyzes the choice between traditional forms of credit and non-traditional forms of credit such as pawnshop loans and payday loans. The authors add to this literature by introducing new data on observed choices of customers switching to pawnshop loans when payday loans are not available. They bring together these facts to discuss the behavioral economics of choice across these credit markets. They outline the relevant behavioral economics theory, which they hope will inform regulators’ choices in governing alterative credit markets.
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