Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol

52 Pages Posted: 23 Feb 2017 Last revised: 13 Mar 2017

Itzhak Ben-David

Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Marieke Bos

Swedish House of Finance - Stockholm School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 21, 2017

Abstract

Increased availability of temptation goods might harm individuals if they have time-inconsistent preferences and consume more in the present than planned before. We study this idea by examining the credit behavior of low-income households around the expansion of the opening hours of retail liquor stores during a nationwide experiment in Sweden. Consistent with store closures serving as commitment devices, expanded operating hours led to higher alcohol consumption (Nordström and Skog 2003) and greater consumer credit uptake and default. Thus, our results show that limiting the availability of temptation goods can improve the financial wellbeing of individuals with inconsistent-time preferences.

Keywords: household finance, behavioral finance, time inconsistent preferences, commitment mechanisms, alcohol, consumer credit

JEL Classification: D03, D12, I18, L51, L66

Suggested Citation

Ben-David, Itzhak and Bos, Marieke, Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol (February 21, 2017). Fisher College of Business Working Paper No. 2017-03-006; Swedish House of Finance Research Paper No. 17-11. Available at SSRN: https://ssrn.com/abstract=2921237

Itzhak Ben-David (Contact Author)

Ohio State University - Fisher College of Business, Finance Department ( email )

2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Marieke Bos

Swedish House of Finance - Stockholm School of Economics ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

HOME PAGE: http://www.mariekebos.org

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