Rational exuberance at the mall: addiction to carrying a credit card balance |
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| Authors: | Kaili Shen |
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| Affiliation: | Department of Economics , University of Victoria , Victoria, B.C., Canada , V8W 2Y2 |
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| Abstract: | The Becker-Murphy model of rational addiction is tested with New Zealand credit card debt data. The results clearly favour the rational addiction model over the myopic, backward-looking model. The estimated short-run and long-run price elasticities are ?0.58 and ?2.32 respectively, and the estimated rate of time-preference is 6.7% per quarter. |
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