Rational exuberance at the mall: addiction to carrying a credit card balance

Kaili Shen and David Giles

Applied Economics, 2006, vol. 38, issue 5, 587-592

Abstract: The Becker-Murphy model of rational addiction is tested with New Zealand credit card debt data. The results clearly favour the rational addiction model over the myopic, backward-looking model. The estimated short-run and long-run price elasticities are -0.58 and -2.32 respectively, and the estimated rate of time-preference is 6.7% per quarter.

Date: 2006
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DOI: 10.1080/00036840500369167

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