Workshop Registration and Breakfast

Audiovisual Lounge

Workshop Introduction

Jeffrey Fuhrer

Executive Vice President and Director of Research

Federal Reserve Bank of Boston

Credit Card Competition and Naïve Hyperbolic Consumers by Elif Incekara

This paper shows that consumers may be unresponsive to interest-rate and credit limits in credit card offers because of a combination of the consumer's timing inconsistency, credit card companies’ grace period offer, and one period lag in using a new card. The author demonstrates that there are circumstances in which zero and positive expected profits would be possible.

Elif Incekara

Presenter / PhD Candidate

Pennsylvania State University

Jeremy Tobacman

Discussant / PhD Candidate

Harvard University

Break

Audiovisual Lounge

Price Discrimination with Experience Goods: Sorting-Induced Biases and Illusive Surplus by Ronald Goettler and Karen Clay

Firms often offer menus of two-part tariffs to price discriminate among consumers with heterogeneous preferences. This paper studies the effectiveness of this screening mechanism when consumers are uncertain about the quality of the good and resolve this uncertainty through consumption experiences. The analysis highlights four elements that influence consumer behavior and affect pricing strategies: beliefs, switching costs, experiential learning, and mistakes on tariff choice.

Ronald Goettler

Presenter / Associate Professor of Economics

Carnegie Mellon University

Presentation

Dirk Bergemann

Discussant / Professor of Economics

Yale University

Lunch

New England Room

Determinants of Borrowing Limits on Credit Cards by Shubhasis Dey and Gene Mumy

The fact that the actual amounts borrowed on credit cards may differ from their approved borrowing limits generates a new source of information asymmetry between borrowers and lenders in this market. The paper proposes a contracting scheme that will help reduce this misallocation problem. Moreover, it explains how new information on borrowing patterns will generate revisions of existing contracts and counteroffers (such as balance transfer offers) from competing banks.

Shubhasis Dey

Presenter / Senior Analyst

Bank of Canada

Presentation

Paul Willen

Discussant / Senior Economist

Federal Reserve Bank of Boston

Presentation

Piecing Together a Portfolio Puzzle: Accounting for Why Households Borrow High and Lend Low by Jonathan Zinman by Shubhasis Dey and Gene Mumy

Many consumers seem to be simultaneously borrowing high and lending low (BHLL). In particular, the mean U.S. household with a credit card fails to use highly liquid assets to pay down credit card debt. The paper examines how BHLL is defined and measured. The author further suggests that most BHLL is a mirage created by measuring “arbitrage” opportunities with respect to pecuniary asset yields rather than the true value of liquidity

Jonathan Zinman

Presenter / Assistant Professor

Department of Economics

Dartmouth College

Presentation

Annamaria Lusardi

Discussant / Associate Professor

Department of Economics

Dartmouth College

Presentation

Break

Audiovisual Lounge

Multihoming in the Market for Payment Media: Evidence from Young Finnish Consumers by Ari Hyytinen and Tuomas Takalo

In the market for payment media, some consumers use only one medium when paying for their point-of-sale transaction , while others multihome and use many. In this paper the authors look at determinants of the adoption of new payment media through the window of multihoming. Using data on young Finnish consumers, the results suggest that increasing consumer awareness could significantly speed up the adoption of new means of payment.

Tuomas Takalo

Presenter / Research Supervisor

Bank of Finland

Presentation

Oz Shy

Discussant / Professor

WZB Research – Social Science Research Center, Berlin and University of Haifa, Israel

Dartmouth College

Presentation

Welcome Reception

Economic Adventure