Rational Exuberance at the Mall: Addiction to Carrying a Credit Card Balance

Kaili Shen and David Giles

No 508, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: We test the Becker-Murphy model of rational addiction with New Zealand credit card debt data. Our 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.

Keywords: Rational addiction; credit card debt (search for similar items in EconPapers)
JEL-codes: D12 D14 D91 I12 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2005-06-21
Note: ISSN 1485-6441
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Journal Article: Rational exuberance at the mall: addiction to carrying a credit card balance (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0508

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