How Preferences for Round Numbers Affect Choices: Stickiness and Jumpiness in Credit Card Payments

Hiroaki Sakaguchi, John Gathergood and Neil Stewart ()
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Hiroaki Sakaguchi: University of Warwick
Neil Stewart: University of Warwick

No 2020-20, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: We explore the effects of round number preferences in credit card payments. Payments at round numbers are very common: 70% of manual non-full credit card payments are at round numbers. Using minimum payment amounts as a natural experiment for the lower bound on payments, we show stickiness in payment amounts when the minimum payment varies in the wide interval between round number bounds yet jumpiness in payment amounts when the minimum payment varies in the narrow interval across round number bounds. Round number preferences can therefore lead to over-estimation of both inattention, and responsiveness, to policies. Our findings have implications for models of inattention and for policy evaluation methods.

Keywords: credit cards; round numbers; heuristic; policy evaluation (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcdx:2020-20

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