Experimental Design
Through the online labor market Amazon Mechanical Turk (MTurk), participants are recruited over several days. Participants are limited to those who live in the United States, speak English, are over the age of 18, and have at least a 90% MTurk task completion rate. Participants are told that they will receive $2 for completion of the study (which will take 15⎼20 minutes) and have a 1 in 30 chance of receiving up to $77.50 worth of bonus payments and Amazon gift cards.
Those who choose to participate in the study are directed to an online tutorial. In the tutorial, participants learn that they will be presented with an income stream of $5 a month for 13 months starting in a month. They could keep this money in full, which would be deposited directly into their MTurk account, or they could use part of this money to make a purchase from a set of attractively priced Amazon Gift Cards. The income stream is intentionally insufficient for making any immediate purchases of gift cards. Participants are told that they could purchase a desired gift card by first forgoing income stream payments until they had “saved” up enough money to cover the cost of the gift card. After forgoing enough payments, participants would receive a claim code to redeem the Amazon Gift Card. Remaining income stream payments would then resume as scheduled. Some participants are also offered an additional purchasing method, “credit,” which enables participants to receive the claim code for the gift card more immediately. If participants purchase with credit, they then would start a credit balance, and that balance would then be paid off through automatic monthly withdrawals from the income stream. Once the credit balance is fully paid, any remaining income stream payments would resume as scheduled.
After participants complete the tutorial and answer questions to demonstrate comprehension, they are asked to make their purchasing decisions. First, they are asked to decide what to purchase, if anything at all. Second, if participants are in one of the credit arms and plan to make a purchase, they also choose whether they would like to purchase with credit or with savings. To motivate honest responses, participants are told that there is a 1 in 30 chance that they will receive the income stream and have their purchasing decision occur. Finally, participants in the credit arms are presented with a calculation question and asked to determine the number of months it would take to pay off a specified credit purchase. To encourage effort, participants are told that one participant from the pool of those who answer this question correctly will win $10 through a random draw.
There are 13 arms: 12 offer a credit option and 1 does not offer a credit option.
Credit plans offered to participants vary in price and quoting method. Participants receive plans that charged 0%, 18%, or 42% APR and are quoted in either installment terms or one of three revolving terms. The "installment" plan instructs participants to add a one-time service fee to the price of the gift card to calculate the starting credit balance. The first revolving credit plan, the "base" plan discloses a monthly percentage rate (MPR) that would be applied every month to the outstanding credit balance. The second revolving plan, the "APR" plan contains the same information as the "base" plan but also includes the annualization of the MPR (i.e., the APR). The third revolving plan, the "unshrouded" plan contains the same information as the "base" plan except that it uses larger font size, underlines, bold font and red color to emphasize the service fee information in the fine print. Regardless of quoting methods, all credit plans with the same price require exactly the same stream of monthly payments
When a participant completes all questions in the study, he is prompted to select a number between 1 and 30, inclusively. Then a random number generator would do the same. If the numbers match, then the participant’s purchasing decision would occur.