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Debtors at Play: Gaming Behavior and Consumer Credit Risk

Author

Listed:
  • Shuaishuai Gong

    (Faculty of Business Administration, University of Macau, Macau SAR 999078, China)

  • Ross Levine

    (Hoover Institution, Stanford University, Stanford, California 94305)

  • Chen Lin

    (Faculty of Business and Economics, University of Hong Kong, Hong Kong SAR 999077, China)

  • Wensi Xie

    (CUHK Business School, Chinese University of Hong Kong, Hong Kong SAR 999077, China)

Abstract

Exploiting a unique high-frequency, individual-level database, we (1) construct individual-level, incentive-compatible proxies of impulsivity based on video gaming behavior and (2) use these proxies to evaluate predictions concerning how impulsivity shapes individuals’ responses to a relaxation of credit constraints as captured by receiving a credit card. We discover that precard gaming intensity—as measured by the frequency and amount of game expenditures—is strongly and positively associated with (a) the probability of defaulting on credit card debt in the future, (b) postcard expenditures on luxury and addictive items, (c) surges in consumption spending immediately after receiving the credit card, and (d) rapid debt accumulation after obtaining the card. Differences in financial literacy, income, income variability, education, and demographics do not drive the results. The results are consistent with (1) neurological and psychological studies stressing that excessive gaming is associated with impulse control deficiencies and (2) behavioral theories stressing that impulsivity, i.e., time-inconsistent preferences for immediate gratification and ineffective strategies for avoiding myopic cues and temptations, substantially influence individual expenditure patterns and borrowing decisions when liquidity constraints are relaxed.

Suggested Citation

  • Shuaishuai Gong & Ross Levine & Chen Lin & Wensi Xie, 2024. "Debtors at Play: Gaming Behavior and Consumer Credit Risk," Management Science, INFORMS, vol. 70(9), pages 5691-5708, September.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:9:p:5691-5708
    DOI: 10.1287/mnsc.2023.4931
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