TY  - JOUR
AU  - Agarwal,Sumit
AU  - Driscoll,John C.
AU  - Gabaix,Xavier
AU  - Laibson,David
TI  - Learning in the Credit Card Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13822
PY  - 2008
Y2  - February 2008
UR  - http://www.nber.org/papers/w13822
L1  - http://www.nber.org/papers/w13822.pdf
N1  - Author contact info:
Sumit Agarwal
Associate Professor of Finance and Real Estate
NUS Business School
Mochtar Raidy Building, BIZ1
15 Kent Ridge Road
Singapore, 119245
Tel: +65 8118 9025
E-Mail: ushakri@yahoo.com

John C. Driscoll
Federal Reserve Board
20th and Constitution Ave., NW
Washington, DC 20551
Tel: (202)452-2628
Fax: (202)452-2301
E-Mail: John.C.Driscoll@frb.gov

Xavier Gabaix
New York University
Finance Department
Stern School of Business
44 West 4th Street, 9th floor
New York, NY 10012
Tel: 212-998-0257
Fax: 212-995-4233
E-Mail: xgabaix@stern.nyu.edu

David Laibson
Department of Economics
Littauer M-12
Harvard University
Cambridge, MA 02138
Tel: 617/496-3402
Fax: 617/495-8570
E-Mail: dlaibson@gmail.com
AB  - Agents with more experience make better choices.  We measure learning dynamics using a panel with four million monthly credit card statements. We study add-on fees, specifically cash advance, late payment, and overlimit fees.  New credit card accounts generate fee payments of $15 per month. Through negative feedback -- i.e. paying a fee -- consumers learn to avoid triggering future fees. Paying a fee last month reduces the likelihood of paying a fee in the current month by about 40%.  Controlling for account fixed effects, monthly fee payments fall by 75% during the first three years of account life.  We find that learning is not monotonic. Knowledge effectively depreciates about 10% per month, implying that learning displays a strong recency effect.
ER  -