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

Vanessa Gail Perry · Joonwhan David Lee

14 citations0/0 files storedInternational Journal of Consumer Studies

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Decision-Making and Behavioral Economics Housing Market and Economics Financial Literacy, Pension, Retirement Analysis

Abstract

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.

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References

1966Psychological stress and the coping process 1998Ego depletion: Is the active self a limited resource?2000Self-regulation and depletion of limited resources: Does self-control resemble a muscle?1998Self-control as a limited resource: Regulatory depletion patterns.2002Yielding to Temptation: Self‐Control Failure, Impulsive Purchasing, and Consumer Behavior 2007Spent Resources: Self‐Regulatory Resource Availability Affects Impulse Buying 2008Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison 2000Self-Regulatory Failure: A Resource-Depletion Approach

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