How Lending Decisions Affect Consumer Behavior
21 Pages Posted: 18 Sep 2019 Last revised: 15 Oct 2019
Date Written: September 9, 2019
To understand how the supply of loans affects consumer behavior we track website visitors of an online furniture retailer offering short-term loans. For a regression discontinuity design we exploit different sets of cut-off rules in the lending function that shifted experimentally over time. Short-term loan offers induce interested window shoppers to finalize purchases, increasing the likelihood of a purchase by 19%, but not to spend more money by adding items. The effect of loan offers on inclinations to finalize purchases is more pronounced for consumers with lower credit scores that are less creditworthy and presumably more credit constrained.
Keywords: consumer credit, lending decisions, household behavior
JEL Classification: G00, G40, D12, D90
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