Delaying Payment and Consumer Behavior

Abstract

Resource constraint at the time of purchase decisions is one important factor that impose restriction on consumer behavior. Past research has found that a higher available resource reduces the resource depletion people experience by spending. Consequently, a unit of spending from that resource is relatively perceived to be smaller. The present research proposes that delaying payment leads consumers to have a perception of greater available resources at the time of purchase. It also reduces the vividness with which people sense their decisions’ consequences, and thus the extent to which the cost of a purchase can control consumer behavior. Therefore, spending becomes easier, costs are perceived to be relatively smaller, and consumers feel less risk at the time of their decisions. Consistent with this possibility, six studies show that delaying payment leads consumers to spend more, take more risk, and change their preferences. These results show that, in contrast to the standard economic approach to deferred payment that compensates for the time value of money by applying an interest rate, delaying payment by itself can provide benefits for businesses. The findings have practical implications for managers interested in predicting or influencing consumers’ purchasing behavior.