Downloads

Demand for Rent-to-own Contracts: A Behavioral Economic Explanation

Publication Date:
Jan 1999
Project Programs:
Behavioral Economics

Rental purchase contracts for consumer durables, often described as `renting-to-own,' typically require total payments two to four times greater than retail prices. Under such conditions, why do lower income consumers ever select this option? Within several low-income samples we consider liquidity constraints, time preferences and risk attitudes as possible explanations for this demand. Use of these services appears to be a risk-averse response to the income and expense shocks faced by low-income households and a financial management tool to address myopic time preferences.

The Russell Sage Foundation
Journal of the Social Sciences

The Russell Sage Foundation Journal of the Social Sciences is a peer-reviewed, open-access journal of original empirical research articles by both established and emerging scholars.

Awards

The Russell Sage Foundation offers awards and positions in our Visiting Scholars program for research.

Newsletter

Join our mailing list for email updates.