Access Type
Open Access Dissertation
Date of Award
1-1-2011
Degree Type
Dissertation
Degree Name
Ph.D.
Department
Economics
First Advisor
Ralph M. BRAID
Abstract
The introduction of the credit card in the mid-twentieth century revolutionized and transformed how people live. Based on a set of new survey data, this dissertation empirically investigates and analyzes consumers' behavior in the credit card market. Specifically, it investigates the underlying determinants of consumers' choices regarding switching credit-card balances. To estimate the likelihood that consumers switch credit cards, two logit models are estimated. Using data from the Consumer Finance Monthly (CFM) of The Ohio State University, the author finds that at the conventional 5 percent level of significance, the following variables have significance: old interest rate, new interest rate, duration of the introductory rate, balances, number of credit cards, home ownership, and age. As expected, interest rates, balance, and the duration of new introductory offer rates have the greatest influence on why or why not people switch credit cards. The findings are consistent with the view that consumers make rational decisions in the credit card market, since balance-carrying consumers are sensitive to the terms of credit card contracts, such as the interest rate on existing balances, the new rate, and the duration of the new rate. It also implies that switching costs are important, challenging Ausubel's (1991) argument of credit card consumer irrationality and Calem and Mester's (1995) empirical finding that credit card rates are sticky because consumers are irresponsive and to rate cuts.
Recommended Citation
Abdelrahman, Omar Adel, "Consumer Search And Switching Behavior: Evidence From The Credit Card Industry" (2011). Wayne State University Dissertations. 152.
https://digitalcommons.wayne.edu/oa_dissertations/152