Consumer Credit with Over-Optimistic Borrowers

• 成果类型: Article
• 署名作者: Exler, Florian; Livshits, Igor; Macgee, James; Tertilt, Michele
• 署名单位: University of Vienna; Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; Bank of Canada; University of Mannheim
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1093/jeea/jvae057
• 发表日期: 2025
• 页码: 1431-1478
• 关键词: quantitative theory; unrealistic optimism; financial literacy; welfare costs; INFORMATION; bankruptcy; temptation; RISK; insurance; BEHAVIOR

摘要

Do cognitive biases call for regulation to limit the use of credit? We incorporate over-optimistic and rational borrowers into an incomplete markets model with consumer bankruptcy. Over-optimists face worse income risk but incorrectly believe they are rational. Thus, both types behave identically. Lenders price loans forming beliefs-type scores-about borrower types. This gives rise to a tractable theory of type scoring. As lenders cannot screen types, borrowers are partially pooled. Over-optimists face cross-subsidized interest rates but make financial mistakes: borrowing too much and defaulting too little. In equilibrium, the welfare losses from mistakes are more than compensated by cross-subsidization. We calibrate the model to the United States and quantitatively evaluate policies to address these frictions: financial literacy education, reducing default cost, increasing borrowing costs, and debt limits. While some policies lower debt and filings, only reducing default costs and financial literacy education improve welfare. However, financial literacy education benefits only rationals at the expense of over-optimists. Score-dependent borrowing limits can reduce financial mistakes but lower welfare.