Alex Citanna: Naive uncertain present bias and credit
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Consumers with false beliefs and uncertain intrapersonal variations in present bias are shown to display heterogeneous behavior in the face of exploitative credit contracts. Their degree of optimism, the intensity of their precautionary savings motives, and their "satiation" level may be responsible for under or over borrowing with respect to sophisticated consumers. Arising inefficiencies may not asymptotically vanish, even with nonsatiation and in the absence of additional contractual frictions such as market power or adverse selection.