The goal gradient effect and repayments in consumer credit

Moritz Lukas

Economics Letters, 2018, vol. 171, issue C, 208-210

Abstract: Based on a unique dataset, I show that repayments in consumer credit increase with the proximity of a borrower’s current debt level to the debt level with the next lower leftmost digit. This behavior is consistent with the goal gradient effect. The effect is only observed for borrowers who have not committed to monthly minimum repayments.

Keywords: Behavioral finance; Household finance; Consumer credit; Banking (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:171:y:2018:i:c:p:208-210

DOI: 10.1016/j.econlet.2018.06.025

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