Psychology and Neuroscience Faculty Database
Psychology and Neuroscience
Arts & Sciences
Duke University

 HOME > Arts & Sciences > pn > Faculty    Search Help Login pdf version printable version 

Publications [#327673] of John W. Payne

search PubMed.

Journal Articles

  1. Atlas, SA; Johnson, EJ; Payne, JW (2017). Time preferences and mortgage choice. Journal of Marketing Research, 54(3), 415-429. [doi]
    (last updated on 2019/05/21)

    Abstract:
    © 2017, American Marketing Association. Mortgage decisions have important consequences for consumers, lenders, and the state of the economy more generally. Mortgage decisions are also prototypical of consumer financial choices that involve a stream of expenditures and consumption occurring across time. The authors use heterogeneity in time preferences for both immediate (present bias) and long-term outcomes to explain a sequence of mortgage decisions, including mortgage choice and the decision to abandon a mortgage. The authors employ an analytic model and a survey of mortgaged households augmented by zip code-level house price and foreclosure data. The model suggests and data confirm that consumers with greater present bias and long-term discounting tend to choose mortgages that minimize up-front costs. However, greater present bias decreases homeowners' willingness to abandon a mortgage, locking them into the contract. Long-term patience increases mortgage abandonment. This reversal across mortgage decisions is difficult for alternative accounts to explain. These results suggest that a two-parameter model of time preferences is helpful for understanding how homeowners make mortgage decisions.


Duke University * Arts & Sciences * Faculty * Staff * Grad * Postdocs * Reload * Login