Project Details
Projekt
Consumer Credit Decisions in a Dual-Process Perspective
Applicant
Professor Dr. Erik Hoelzl
Subject Area
Economic Theory
Term
from 2015 to 2019
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 215899445
Consumer credit has become pervasive over the last decades, and has been connected to financial and psychological difficulties for vulnerable consumer groups, e.g., low-income consumers and young adults. With the development of new forms of credit offers such as in-store credit and instant credit over the internet, credit decisions become more spontaneous and potentially more problematic. This project applies concepts and approaches from the first phase of the research unit to the topic of consumer credit decisions. The project pursues two research lines, borrowing and repaying, each focusing on specific decisions consumers make in the phases before and after signing a credit contract. Research line I (borrowing) examines (a) consumer decisions when choosing between different credit offers and (b) consumer decisions regarding instant credit offers. Research line II (repaying) examines (a) consumer decisions when managing several open credit accounts and (b) consumer decisions regarding tempting new opportunities while still having the obligation to repay an open credit. These topics are relevant for credit behavior because consumers have been found to often use heuristics and to focus on selected information cues when deciding on credit offers, and when managing their repaying obligations. Credit decisions are in part driven by automatic processes, and recent new credit forms are likely to make automatic processes more influential. The research agenda draws on three theoretical accounts. (1) Building on dual-process theories, the project will examine specific decisions on credit use as an interplay of automatic and controlled processes influenced by situational (e.g. cognitive load, ego depletion) and personal characteristics (e.g., habitual decision style, self-control). (2) Building on self-regulation theories, the project will examine how automatic and controlled processes in credit decisions are influenced by specific self-regulation strategies (implementation intentions and representation of goal-directed actions). In particular, the project explores how these strategies can help consumers to improve information elaboration and resistance to temptations from credit offers and spending opportunities. (3) Taking a mental accounting perspective, the project will examine the interplay between the elements of the focal credit transaction (i.e., good and installments) and the relation between the focal credit transaction and the financial environment. In particular, the project will examine how specific aspects of mental accounting (choice bracketing, matching, coupling) influence automatic and controlled processes in credit decisions. The project has theoretical implications for the understanding of dual processes in financial decision-making. Practical implications concern individual consumers, consumer counseling organizations, banks and credit institutions. ln addition, results can inform public policy, in particular consumer policy.
DFG Programme
Research Units
