Time inconsistency and overdraft use: evidence from transaction data and behavioral measurement experiments

  • Households regularly fail to make optimal financial decisions. But what are the underlying reasons for this? Using two conceptually distinct measures of time inconsistency based on bank account transaction data and behavioral measurement experiments, we show that the excessive use of bank account overdrafts is linked to time inconsistency. By contrast, there is no correlation between a survey-based measure of financial literacy and overdraft usage. Our results indicate that consumer education and information may not suffice to overcome mistakes in households’ financial decision-making. Rather, behaviorally motivated interventions targeting specific biases in decision-making should also be considered as effective policy tools.

Download full text files

Export metadata

Metadaten
Author:Andrej GillORCiDGND, Florian HettGND, Johannes Tischer
URN:urn:nbn:de:hebis:30:3-645987
URL:https://ssrn.com/abstract=4076790
DOI:https://doi.org/10.2139/ssrn.4076790
Parent Title (English):SAFE working paper ; No. 347
Series (Serial Number):SAFE working paper (347)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2022
Year of first Publication:2022
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2022/04/11
Tag:Behavioral Measurement; Experiment; Fintech; Household Finance; Paycheck Sensitivity; Time Inconsistency; Time Preferences
Issue:March 31, 2022
Page Number:87
HeBIS-PPN:495041343
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht