Publications [#327673] of John W. Payne

Papers Published

1. Atlas, SA; Johnson, EJ; Payne, JW, Time preferences and mortgage choice, Journal of Marketing Research, vol. 54 no. 3 (June, 2017), pp. 415-429, SAGE Publications [doi]
   (last updated on 2023/06/01)

   Abstract:
   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.