Learning in the credit card market
By: Sumit Agarwal, John C. Driscoll, Xavier Gabaix, David Laibson.
Contributors: Driscoll, John C. 1969-; Gabaix, Xavier.; Laibson, David I.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13822; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13822.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Agents with more experience make better choices.  We measure learning dynamics using a panel with four million monthly credit card statements.  We study add-on fees, specifically cash advance, late payment, and overlimit fees.  New credit card accounts generate fee payments of $15 per month.  Through negative feedback -- i.e.  paying a fee -- consumers learn to avoid triggering future fees.  Paying a fee last month reduces the likelihood of paying a fee in the current month by about 40%.  Controlling for account fixed effects, monthly fee payments fall by 75% during the first three years of account life.  We find that learning is not monotonic.  Knowledge effectively depreciates about 10% per month, implying that learning displays a strong recency effect"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/13/2008.

Includes bibliographical references.

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Mode of access: World Wide Web.