Abstract
We develop a structural consumer life-cycle model to investigate consumers' adoption and usage decisions of ATM cards. If consumers are forward-looking with a known discount factor, our framework can control for the heterogeneous life span faced by consumers of different ages, and hence measure adoption costs more accurately. Moreover, our framework can recover the monetary value of total adoption costs. To estimate our model, we use an Italian panel data set, which contains information on consumers' adoption decisions for ATM cards, and their cash withdrawal patterns before and after adoption. Our results suggest that one could significantly overestimate adoption costs for the elderly when ignoring their shorter life span. Our policy experiments show that a sign-up bonus targeted to the elderly could be much more effective if implemented as a limited-time offer rather than a permanent offer. Interestingly, if the sign-up bonus is permanent, younger consumers may strategically postpone adoption.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 903-922 |
| Number of pages | 20 |
| Journal | Management Science |
| Volume | 60 |
| Issue number | 4 |
| DOIs | |
| State | Published - Jan 1 2014 |
| Externally published | Yes |
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Keywords
- Adoption costs
- ATM cards
- Cash demand model
- Consumer life-cycle model
- Dynamic programming
- Financial innovation
- Limited time promotional offer
- Permanent promotional offer
ASJC Scopus subject areas
- Strategy and Management
- Management Science and Operations Research
Cite this
Dynamics of consumer adoption of financial innovation : The case of atm cards. / Yang, Botao; Ching, Andrew.
In: Management Science, Vol. 60, No. 4, 01.01.2014, p. 903-922.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Dynamics of consumer adoption of financial innovation
T2 - The case of atm cards
AU - Yang, Botao
AU - Ching, Andrew
PY - 2014/1/1
Y1 - 2014/1/1
N2 - We develop a structural consumer life-cycle model to investigate consumers' adoption and usage decisions of ATM cards. If consumers are forward-looking with a known discount factor, our framework can control for the heterogeneous life span faced by consumers of different ages, and hence measure adoption costs more accurately. Moreover, our framework can recover the monetary value of total adoption costs. To estimate our model, we use an Italian panel data set, which contains information on consumers' adoption decisions for ATM cards, and their cash withdrawal patterns before and after adoption. Our results suggest that one could significantly overestimate adoption costs for the elderly when ignoring their shorter life span. Our policy experiments show that a sign-up bonus targeted to the elderly could be much more effective if implemented as a limited-time offer rather than a permanent offer. Interestingly, if the sign-up bonus is permanent, younger consumers may strategically postpone adoption.
AB - We develop a structural consumer life-cycle model to investigate consumers' adoption and usage decisions of ATM cards. If consumers are forward-looking with a known discount factor, our framework can control for the heterogeneous life span faced by consumers of different ages, and hence measure adoption costs more accurately. Moreover, our framework can recover the monetary value of total adoption costs. To estimate our model, we use an Italian panel data set, which contains information on consumers' adoption decisions for ATM cards, and their cash withdrawal patterns before and after adoption. Our results suggest that one could significantly overestimate adoption costs for the elderly when ignoring their shorter life span. Our policy experiments show that a sign-up bonus targeted to the elderly could be much more effective if implemented as a limited-time offer rather than a permanent offer. Interestingly, if the sign-up bonus is permanent, younger consumers may strategically postpone adoption.
KW - Adoption costs
KW - ATM cards
KW - Cash demand model
KW - Consumer life-cycle model
KW - Dynamic programming
KW - Financial innovation
KW - Limited time promotional offer
KW - Permanent promotional offer
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U2 - 10.1287/mnsc.2013.1792
DO - 10.1287/mnsc.2013.1792
M3 - Article
VL - 60
SP - 903
EP - 922
JO - Management Science
JF - Management Science
SN - 0025-1909
IS - 4
ER -