Preferences over sequences of payments: A new validation of the<mml:math xmlns:mml="http://www.w3.org/1998/Math/MathML" display="inline" overflow="scroll" id="d1e1478" altimg="si2.gif"><mml:mi>q</mml:mi></mml:math>-exponential discounting

Rambaud, Salvador Cruz; Pascual, Joaquín López; Álvarez, María de los Ángeles Del Pino

doi:10.1016/j.physa.2018.09.169

Cited by 6 publications

(23 citation statements)

References 26 publications

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“…We conducted this experiment in the same way as Hoelzl et al (2011) and Rambaud et al (2019) . Participants read scenarios which described that they worked for a big company and earned 10,000 Yuan per month after taxes (1USD≈7 Yuan or $1≈¥7, ¥10,000≈$1,400).…”

Section: Methodsmentioning

confidence: 99%

“…The loan is three-year term. Both Hoelzl et al (2011) and Rambaud et al (2019) used 5-year loan term in their experiments, but 3-year term is more common in China’s auto loan market. The loan was repaid in monthly installments.…”

Section: Methodsmentioning

confidence: 99%

“…The monthly principal repayments of the rising plan were ¥1,666.7 in year 1, ¥3,333.3 in year 2, and ¥5,000 in year 3. We adopted similar amortization schedule as Rambaud et al (2019) except for constant profiles. Both Hoelzl et al (2011) and Rambaud et al (2019) designed the constant profiles by fixing the monthly principal repayment.…”

Section: Methodsmentioning

confidence: 99%

“…We adopted similar amortization schedule as Rambaud et al (2019) except for constant profiles. Both Hoelzl et al (2011) and Rambaud et al (2019) designed the constant profiles by fixing the monthly principal repayment. The monthly payments of such constant profiles are actually a falling sequence, as the monthly payment of interest falls over time.…”

Section: Methodsmentioning

confidence: 99%

“…The respondents preferred the falling repayment plan over other options, and they took out loans that contradicted their financial benefits. Rambaud et al (2019) also found a strong preference for falling sequence in car loans, and used the q-exponential discounting to explain the improving sequence effect.…”

Section: Introductionmentioning

confidence: 99%

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Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

Yang

Wang

et al. 2021

Front. Psychol.

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The improving sequence effect suggests that in choices between a rising earning and any other sequences, participants prefer the rising earning. Recent studies show that the improving sequence effect also exists in a loan context. As consumers have a strong preference for falling loan profiles, banks may consider to offer loans in which the loan repayments concentrate at the beginning of the loan term. In this paper, we examined the improving sequence effect in context of a car loan with three repayment plans expressed in temporally reframed prices (TRP). By regressing the evaluation of loan profiles on the perceived price attractiveness, price complexity, TRP and the interaction terms, we find that (1) the perceived price attractiveness and price complexity significantly predict the loan evaluation, and they also explain a significant proportion of variance in loan evaluation; (2) the TRP effect interacts with the improving sequence effect. Specifically, with the introduction of TRP, respondents prefer constant profiles over falling profiles. TRP may explain why level-payment loans are still popular in real world, though the improving sequence effect suggests otherwise.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

Yang

Wang

et al. 2021

Front. Psychol.

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A systematic review of the main anomalies in intertemporal choice

Rambaud

Fernández

Oller

2023

Journal of Behavioral and Experimental Economics

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Reasons for loan repayment plan preferences.

Yang¹,

Wang²,

Li³

et al. 2020

Journal of Neuroscience, Psychology, and Economics

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Recent research shows that the well-established preference for improvement can also be observed in a loan context. Consumers prefer loan repayment plans with falling or constant profiles over rising profiles. In this article, we replicated and extended Hoelzl, Kamleitner, and Kirchler’s (2011) study by altering the loan rate, loan amount, and loan combination. As expected, our results revealed a preference for falling over rising profiles regardless of loan rate, loan amount, and loan combination. We also found that undergraduate participants gave significantly lower scores to falling sequences but higher scores to constant sequences and rising sequences at a 10% loan rate, relative to the scores they gave at a 0% loan rate. They also gave significantly lower scores to falling sequences and constant sequences but higher scores to rising sequences when evaluating a phone loan, relative to the scores they gave when considering a car loan. We attempted to explore the reasons for the resulting preference pattern. Although optimization was identified as the most frequently chosen reason among the 4 explanatory options, about two-third respondents made decisions based on other reasons. An association between explanatory reasons and the preference for falling sequences was observed. Our findings suggest that future studies should focus on psychological reasons for the improving sequence effect rather than searching for discount functions to accommodate experimental results.

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Preferences over sequences of payments: A new validation of theq-exponential discounting

Cited by 6 publications

References 26 publications

Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

Price Attractiveness and Price Complexity: Why People Prefer Level-Payment Loans

A systematic review of the main anomalies in intertemporal choice

Reasons for loan repayment plan preferences.

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