Conned by a Cashback? Disclosure, Nudges and Consumer Rationality in Mortgage Choice

Michael King () and Anuj Pratap Singh ()
Additional contact information
Michael King: Department of Economics, Trinity College Dublin
Anuj Pratap Singh: Department of Economics, Trinity College Dublin

Economic Papers from Trinity College Dublin, Economics Department

Abstract: Financial products with a cashback feature typically cost consumers more in the long run, but their popularity is rising in the mortgage and credit markets. Using a nationally representative online sample, we find that consumers who are younger, less educated and suffer from present bias are more likely to choose costly cash back mortgages. Through a series of experiments, we provide strong evidence that advanced disclosure improves financial decision making of customers and that negative nudges, or advertising, encourages prospective buyers into more costly mortgages. We also find evidence that consumers who demonstrate limited attention bias choose more expensive cashback mortgages that are financially equivalent at the point of drawdown.

Keywords: Household Finance; Consumer Protection; Mortgages; Behavioural Biases; Marketing Nudges; Choice Experiment (search for similar items in EconPapers)
JEL-codes: D15 G21 G28 G41 M3 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-mkt and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.tcd.ie/Economics/TEP/2018/TEP1118.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1118

Access Statistics for this paper

More papers in Economic Papers from Trinity College Dublin, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Colette Angelov ().