The Hidden Costs of Hidden Debt

Posted: 12 May 2011 Last revised: 4 Dec 2013

See all articles by Johan Almenberg

Johan Almenberg

affiliation not provided to SSRN

Artashes Karapetyan

ESSEC Business School

Date Written: May 1, 2011

Abstract

We report evidence that salience may have economically significant effects on homeowners' borrowing behavior, through a bias in favour of less salient but more costly loans. Survey evidence corroborates the existence of such a bias. We outline a simple model in which some consumers are biased and show that under plausible assumptions this affects prices in equilibrium. Market data support the predictions of the model.

Keywords: housing market, household finance, co-ops, salience

JEL Classification: D12, G14, G21. G32

Suggested Citation

Almenberg, Johan and Karapetyan, Artashes, The Hidden Costs of Hidden Debt (May 1, 2011). Forthcoming in the Review of Finance; International Conference of the French Finance Association (AFFI), May 11-13, 2011. Available at SSRN: https://ssrn.com/abstract=1836868 or http://dx.doi.org/10.2139/ssrn.1836868

Johan Almenberg (Contact Author)

affiliation not provided to SSRN

Artashes Karapetyan

ESSEC Business School ( email )

Avenue Bernard Hirsch
3
Cergy, 95021
France

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