CEU Electronic Theses and Dissertations, 2010
| Author | Kincses, Attila |
|---|---|
| Title | Empirical Analyses on the Demand of Unsecured Credit |
| Summary | This thesis provides empirical evidence on the fact that neoclassical and behavioral mechanisms are both important in the determination of unsecured credit demand. Chapter 1 demonstrates that while previous research shows that the rich should save more and should have lower debt burden, in the case of credit cards the relationship is empirically non-monotonic: credit card borrowing is the highest in the case of households with medium permanent income. The chapter then reviews the related literature and argues that the neoclassical explanations (e.g., liquidity constraints or precautionary savings) account for about half of the peak in the credit card debt-to-income ratio of the middle-class, so these should be extended with behavioral explanations (e.g., with “animal spirits” models of temptation and self control or with investment mistakes) to fully understand the empirical fact. Chapter 2 contributes to the emerging literature of the transactional use of credit cards. First, a simple neoclassical model of convenience use is presented in which households use credit card if the marginal benefit from the usage is higher than the marginal cost. Afterwards, the model is extended to incorporate uncertainty and present biased preferences. The second part of this chapter presents an empirical analysis that supports the previous transactional use model. While some findings are fully in line with the neoclassical version of the model, several other empirical examples point towards potential biases and mistakes in the transactional use decision. Contributing to the literature of advertising, Chapter 3 uses a unique data set of an anonymous European bank to analyze the impact of personal loan advertising on loan demand. The chapter reports that television commercials have higher impact on loan applications than internet or newspaper advertising. Furthermore, certain customer segments, namely rich or young individuals react to TV advertising more than poorer or older individuals, respectively. Motivated by these empirical facts, the chapter develops a life cycle consumption model with three potential channels through which advertising alters borrowing. First, advertising may provide information about the existence of the brand. Second, commercials may provide information about the interest rates. Finally, advertising may act as a taste shifter. The empirical facts are in line with the latter persuasive view of advertising, and among other plausible explanations, the facts point towards the importance of internal self-control mechanisms. |
| Supervisor | Mátyás, László and Kézdi, Gábor |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2010/kincsesa.pdf |
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