What Shapes Consumer Choice and Financial Products? - A Review

Central to the field of consumer finance is that consumers make financial decisions that do not always coincide with the ideal financial decisions ideally depicted in optimal economic models [Campbell, 2006]. In this review, we discuss developments in the field of household finance, focusing on how consumers make suboptimal financial decisions across different types of settings and factors that affect these suboptimal decisions. Rather than conducting a comprehensive survey, we focus more specifically on consumer choice in context of research in credit card borrowing, housing and mortgage debts, investments and savings decisions, as well as spending and consumption. We also discuss financial product design and marketing; regulatory landscape of lenders of consumer financial products; and consumer fintech. We also discuss five future research directions and considerations for researchers and policy makers.

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