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Bank Credit Cards: Consumer Irrationality versus Market Forces
Author(s) -
CARGILL THOMAS F.,
WENDEL JEANNE
Publication year - 1996
Publication title -
journal of consumer affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.582
H-Index - 62
eISSN - 1745-6606
pISSN - 0022-0078
DOI - 10.1111/j.1745-6606.1996.tb00063.x
Subject(s) - irrationality , economics , credit card , monetary economics , interest rate , government (linguistics) , consumer demand , microeconomics , business , finance , rationality , linguistics , philosophy , political science , law , payment
Why are bank card interest rates sticky? One explanation is bank card consumer irrationality, a potentially significant market failure requiring government intervention. Alternate explanations focus on efficient market forces. The 1989 Federal Reserve Survey of Consumer Finances data are not consistent with the consumer irrationality hypothesis. The data are consistent with a market‐based model of demand for balances and suggest that consumers may rationally eschew search because small outstanding balances imply low returns to search.