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.

Presenter:
Elif Incekara
PhD Candidate
Pennsylvania State University
Presentation

Discussant:
Jeremy Tobacman
PhD Candidate
Harvard University

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.

Presenter:
Ronald Goettler
Associate Professor of Economics
Carnegie Mellon University
Presentation

Discussant:
Dirk Bergemann
Professor of Economics
Yale University

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.

Presenter:
Shubhasis Dey
Senior Analyst
Bank of Canada
Presentation

Discussant:
Paul Willen
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

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.

Presenter:
Jonathan Zinman
Assistant Professor
Department of Economics
Dartmouth College
Presentation

Discussant:
Annamaria Lusardi
Associate Professor
Department of Economics
Dartmouth College
Presentation

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.

Presenter:
Tuomas Takalo
Research Supervisor
Bank of Finland
Presentation

Discussant:
Oz Shy
Professor
WZB Research – Social Science Research Center, Berlin
and
University of Haifa, Israel
Presentation