Shopping for a home vs. a loan: the role of cognitive resource depletion

Abstract

The authors suggest that the process of shopping for a home and choosing between alternative property features depletes individuals’ cognitive resources, which in turn results in sub‐optimal home financing decisions. Thus, in the span of time that follows the shopping experience, consumers will devote less attention to choosing a mortgage, resulting in a higher propensity to select higher‐risk, adjustable‐rate mortgage products. The results of two controlled experiments demonstrate that participants in an online house shopping simulation were more likely to select one of the high‐risk mortgage offers, and spent less time selecting a mortgage than participants in the control condition. In addition, contrary to expectations, warning participants about cognitive resource depletion exacerbated these effects. These findings imply that consumer decisions could be improved by imposing a temporal separation between shopping for a home and shopping for financing.

Motivation for emergency and retirement saving: an examination of Regulatory Focus Theory

“…Information overload is often addressed in financial decision making: asset allocation (Agnew and Szykman, ), debt repayment (Navarro‐Martinez et al ., ), mortgage choice (Perry and Lee, ) and payday lending (Bertrand and Morse, ). Prior studies on regulatory focus and selective information processing indicate that under high information load, reliance on positive information was greater for promotion‐oriented individuals (the opposite for prevention orientation).…”

Dark financial profile leading to debt traps – A theoretical framework

“…Personal behavioural finance draws from various disciplines, including sociology, psychology and economics (Lučić et al, 2022). We note that research on this subject has been and remains active (Perry & Lee, 2012). As mentioned, we also posit that three variables explain in part why these consumers fall for debt traps and endure financial hardship (Brown, 2010): disconnection, irrationality and deception.…”

“…This debt was composed largely of mortgage‐related charges (roughly 75%) versus credit charges. From 2008 to 2009, as the crisis built up, refinancing mortgages nearly doubled (Perry & Lee, 2012). This phenomenon was replicated in many markets worldwide, including in Iceland, Greece, and Spain (Merrouche & Nier, 2010).…”

“…Some consumers of financial products do not account for, or refuse to account for, the possibility of substantial penalty, back‐load repayments, and spikes in lending rates (Heidhues & Kőszegi, 2010), a behaviour that often ushers them into debt traps. Muraven and Baumeister (2000) as well as Perry and Lee (2012) point to one of the most prevalent related financial models, which suggests that consumers not only draw from a common, limited pool of resources, but that they also become intellectually depleted and lose track of (disconnect from) their financial objectives. Other dynamics come into play: Vohs and Faber (2007) show that people spend money more freely after suppressing unwanted thoughts, so that they tend to ignore market warning signs instead of preparing for market risks.…”

What Are the Effects of Short Video Storytelling in Delivering Blockchain-Credentialed Australian Beef Products to China?

“…Table 2 reports the demographic characteristics of 103 valid samples, which is reasonably accepted in an exploratory study designed within control and treatment settings [61]. The control and treatment groups comprise 48 and 28 local respondents and 14 and 13 foreign respondents respectively.…”