How Preferences for Round Numbers Affect Choices: Stickiness and Jumpiness in Credit Card Payments

73 Pages Posted: 24 Apr 2020 Last revised: 7 Jul 2020

See all articles by Hiroaki Sakaguchi

Hiroaki Sakaguchi

University of Warwick

John Gathergood

University of Nottingham - School of Economics

Neil Stewart

University of Warwick - Warwick Business School

Date Written: July 6, 2020

Abstract

We explore the effects of round number preferences in credit card payments. Payments at round numbers are very common: 70% of manual non-full credit card payments are at round numbers. Using minimum payment amounts as a natural experiment for the lower bound on payments, we show stickiness in payment amounts when the minimum payment varies in the wide interval between round number bounds yet jumpiness in payment amounts when the minimum payment varies in the narrow interval across round number bounds. Round number preferences can therefore lead to over-estimation of both inattention, and responsiveness, to policies. Our findings have implications for models of inattention and for policy evaluation methods.

Keywords: credit cards, round numbers, heuristic, policy evaluation

JEL Classification: D12, D14, G02, G20

Suggested Citation

Sakaguchi, Hiroaki and Gathergood, John and Stewart, Neil, How Preferences for Round Numbers Affect Choices: Stickiness and Jumpiness in Credit Card Payments (July 6, 2020). Available at SSRN: https://ssrn.com/abstract=3564728 or http://dx.doi.org/10.2139/ssrn.3564728

Hiroaki Sakaguchi

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

John Gathergood (Contact Author)

University of Nottingham - School of Economics ( email )

Sir Clive Granger Building
University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://https://sites.google.com/site/gathergoodjohn/

Neil Stewart

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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