Consumer choices with wealth preferences and separation of consumption and payment

Carolyn St Aubyn

No 2201, BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics

Abstract: This paper presents a consumer choice model in which both consumption and wealth are valued. The assumption on wealth can help explain observed costly consumer choices such as paying charges for late settlement of bills, and credit card debt costs. The paper addresses one such costly choice puzzle - the credit card debt, or co-holding, puzzle where cash and credit card debt are simultaneously held. An empirical analysis gives a new perspective on the extent of this puzzle and the model shows, theoretically, how including preferences for wealth can help explain the co-holding by individuals with very high levels of liquidity whose behaviour is thus hard to explain with existing theories for co-holding. The model also has implications for optimal demand levels in payment set-ups where payment is delayed, such as such as the rapidly growing Buy Now, Pay Later financing.

Date: 2022-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://eprints.bbk.ac.uk/id/eprint/47456/1/47456.pdf First version, 2022
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:bbk:bbkcam:2201

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics Malet St.,London WC1E 7HX, UK.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).