922. Buy now pay later: Intertemporal preferences in installment loan choices
Invited abstract in session WC-61: Behavioural studies in cognate domains 2, stream Behavioural OR.
Wednesday, 12:30-14:00Room: Maurice Keyworth G.31
Authors (first author is the speaker)
| 1. | Jessie Jiang
|
| Business School, University of Bristol | |
| 2. | Chris Anderson
|
| CORNELL SC JOHNSON COLLEGE OF BUSINESS, Cornell University |
Abstract
Buy now pay later (BNPL) is a payment arrangement that enables consumers to make immediate purchases while spreading the payment through fixed monthly installments over time. It has gained rapid adoption across diverse markets including fashion, electronics, and travel. BNPL providers like Afterpay, Affirm and Klarna often present the purchase amount in the form of small monthly payments to attract consumers, and the payment terms are predetermined by the providers. Credit score dictates the loan amount, duration, and interest rates available to the applicants. On the other hand, as credit scores could reflect consumers’ risk perceptions and spending habits, they might also be associated with the heterogenous preferences in consumers’ loan choices. Additionally, when products are not consumed instantly, consumers need to balance future consumption with future payments. We introduce two types of temporal elements into the choice model: (1) anticipation utility derived from the total order amount and booking window, and (2) time discounting for future monthly payments. Utilizing a cruise line purchase dataset from a BNPL loan provider, we compare a baseline multinomial logit model with models that address endogeneity, heterogeneity, and intertemporal preferences. The results help understanding the borrowing decisions among BNPL users, providing insights to regulators for consumer protections.
Keywords
- Behavioural OR
- Revenue Management and Pricing
- E-Commerce
Status: accepted
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