Pawnbroking Is The Oldest Source Of Credit Essay Example

lending in these studies. Our Table 1 provides information about the interest rates associated with pawnshop loans. For an analysis of pawnbroking and payday loans at the state level, refer to Susan Payne Carter's research on the impact of allowing payday loan rollovers.

15. 2012) (unpublished Ph. D. dissertation, Vanderbilt Univ.), available at https://my.vanderbilt.

edu/susancarter/files/2011/07/ Carter_Susan_JMP_website2. pdf. 7 For a comprehensive analysis of pawnbroking (instead of just examining customer behavior), refer to CASKEY, supra note 1. To specifically study the behavior of pawnshop customers, see Bos, Carter & Skiba, supra note 3, as well as the works by Sumit Agarwal, Paige Marta Skiba & Jeremy Tobacman titled Payday Loans and Credit Cards: New Liquidity and Credit Scoring Puzzles?, found in 99 AM. ECON.

REV. 412 (2009). 8 On payday loans, for more information, see Agarwal, Skiba & Tobacman, supra note 7, at 412; Neil Bhutta, Paige Marta Skiba & Jeremy Tobacman, Payday Loan Choices and Consequences 1–23 (Vanderbilt Univ. Law and Econ. Research Paper Series, Paper No. 12–30, 2012), available at 6 2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS 195 because the loans made are small (the average loan size in our data is $79). Despite their small principal, however, pawnshop loans are an important tool that many consumers use to manage their monthly finances during financial shortfalls.

Our findings on differential repayment rates for pawn contracts support two models of decision-making: one where consumers are aware of their self-control problems, and another where sentimentality towards an object influences utility maximization. Loss aversion, the additional loss in utility felt relative to a reference point, may also play a role, as explained below. Borrowers referred to as "hyperbolic discounters" by behavioral

economists may use sentimental items like wedding rings to motivate themselves to repay the loan, instead of less sentimental items like electronics. Although pawnshops accept pledges of various values, many borrowers choose to pledge something of great personal significance. This research contributes to the growing body of evidence on hyperbolic discounting in behavioral economics and introduces pawnshops as a topic in the discussion on intertemporal choice in markets (O’Donoghue & Rabin, 116).

According to a 2001 article in the Journal of Economics (J. OF ECON.) [121, 125 n. 5], "hyperbolic discounting" refers to the tendency for individuals to prioritize immediate well-being as the deadline approaches, indicating their preference for instant gratification.

Professors DellaVigna and Malmendier (2006) examined the issue of self-control problems related to exercise in their article "Paying Not to Go to the Gym" published in the American Economic Review. They present evidence of this phenomenon and discuss it extensively.

For additional research on self-control problems, refer to Heather Royer, Mark Stehr & Justin Sydnor's (Oct. 28, 2011) unpublished manuscript titled "Using Incentives and Commitments to Overcome Self-Control Problems: Evidence from a Workplace Field Experiment." This manuscript can be accessed at http://experiments.cob.calpoly.

For work on self-control problems in credit markets, refer to David Laibson, Andrea Repetto, and Jeremy Tobacman's research titled "Estimating Discount Functions with Consumption Choices over the Lifecycle" (Nat’l Bureau of Econ. Research, Working Paper No. edu/seminars/Royer. df).

The document titled "13314" from August 2007 can be found at http://www.nber.org/papers/w13314. For information on credit cards, refer to the work of Haiyan Shui and Lawrence M.

The topic of credit cards is discussed in an unpublished manuscript titled "Time Inconsistency in the Credit Card Market" (Jan. 30,

2005) by Ausubel. The manuscript can be accessed at http://www.ausubel.com/creditcard-papers/time-inconsistency-credit-cardmarket.pdf. To learn about payday loans, refer to the study "Paydays Loans, Uncertainty and Discounting: Explaining Patterns of Borrowing, Repayment, and Default" conducted by Paige Marta Skiba & Jeremy Tobacman from Vanderbilt Law and Econ.

The research paper series titled Paper No. 08-33 was published on Aug. 21, 2008 and is available for viewing on the website http://papers.ssrn.

The website com/sol3/papers.cfm?abstract_id=1319751 provides information on pawnshops and behavioral economics for the years 2012-2013. Pawnshops are often thought to have high interest rates, but when compared to other options like payday loans, tax refund anticipation loans, and rent-to-own agreements, their fees are typically lower. All states permit the operation of pawnshops and most have laws that limit the fees they can charge. These restrictions are imposed through usury laws or regulations on small loans. Table 1 in the text lists the state laws that govern pawnshop interest rates.

States have the power to enforce regulations on pawnshops regarding fees and the return of excess proceeds to customers after reselling an item. In Texas, the maximum interest rates allowed are 20% per thirty days for loans up to $150 and 15% per thirty days for loans exceeding $200. According to Skiba & Tobacman, the annualized interest rates for two-week payday loans can reach 468%. Gregory Elliehausen's study at Georgetown University reveals consumer utilization of tax refund anticipation loans.

(McDonough Sch. of Bus. Credit Research Center, Monograph No. 37, Apr. 2005) (showcasing the considerable annualized interest rates of up to 162% for ten-day loans).

43% of the customer characteristics and contract outcomes of rent-to-own agreements were studied by Michael H. Anderson and Sanjiv Jaggia

in the "Journal of Economics and Business".

The document discusses the impact of government regulations on the availability of pawn loans in 51 U.S. jurisdictions. It references a study from 2009 that cites interest rates on these loans being higher than 100%. This information is found in the Journal of Finance, volume 30, authored by Joshua D. Shackman and Glen Tenney.

SERV. RESEARCH 69, 81 (2006); Nancy PINDUS, DANIEL KUEHN ; RACHEL BRASH, URBAN INST., STATE RESTRICTIONS ON SMALL-DOLLAR LOANS AND FIN. SERVS. 2004–2009: SUMMARY, DOCUMENTATION, AND DATA 1 (Urban Inst., Oct.

The Urban Institute's 2010 report states that forty states have set interest rate limits on pawnshop loans, which can be found at http://www.urban.org/publications/412305.html. However, these limits are rarely followed in practice. Shackman & Tenney also list the states that have implemented these requirements in their article at 81.

17 Texas Pawnshop Rate Chart, TEX. OFFICE OF CONSUMER CREDIT COMM'R, http://www. occc. state.

The maximum legal interest rates for pawnshops in various states are listed in Table 1, sourced from tx.us/pages/int_rates/pRate13.df (last visited November 20, 2012). The rates range from 25% per month in Alabama to no specified rate in Arkansas, with each state having its regulations.

32 2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming 4% / mo max{7. 50, 10%} 4% / mo 2% / mo reg. by municipalities 5% / mo 20% / mo 3% / mo 2. 5% / mo 5% / mo $22. 50/$100 / mo none 2% / mo $20 / mo 10% / mo 3% /

mo 5% / mo 3% / mo none 3% / mo 20% / mo 199 Table 1 shows pawnshop laws by state as of 2011. The state laws on pawn shops come from individual state regulating institutions.

Despite regulations being in place for pawnshops, they have not received much attention from regulators recently. This is unlike credit cards, student loans, and payday loans, which the Consumer Financial Protection Bureau (CFPB) has explicitly identified as areas of interest. It seems that pawnshops are not on the radar of the CFPB as stated in their Know Before You Owe: Credit Cards document.

The relative lack of regulatory attention given to pawnshops may be attributed to consumers' ability to avoid significant financial mistakes when utilizing these establishments. One possible explanation for this is the unique aspect of using personal items, especially those with sentimental value, as collateral. This distinction sets pawnshop loans apart from credit cards, payday loans, and similar financial resources regarding borrowers' repayment and default tendencies.

III. Data
We have utilized administrative records from a prominent national pawnshop lender in the United States for our analysis. Our data set comprises 398,722 pawnslips from Texas-based stores that were operational between 1997 and 2002. Through these slips, we can observe the loan amount, whether it was repaid or defaulted on, and the specifics of the pledge.

The store divides its items into several groups: Jewelry, TVs/Electronics, Tools/Equipment, Household Items, Sporting Equipment, Guns, Instruments, and Cameras/Equipment. Although our dataset is extensive and comprehensive, it only represents pawnshop use in Texas. However, previous research has shown that pawnshop characteristics in the United States and Sweden are remarkably similar. Figure 1 and

Table 2 present key summary statistics from our data.

The average loan amount is $79 and has a duration of 109 days (last checked on November 25, 2012). For more information, please visit the "Know Before You Owe: Student Loans" page on the Consumer Financial Protection Bureau website at http://www.consumerfinance.gov/students/knowbeforeyouowe (last checked on November).

Zixta Q. Martinez expressed her opinion on payday loans for the official record on March 25, 2012. For further information regarding this subject, kindly refer to the website of the Consumer Financial Protection Bureau at http://www.consumerfinance.gov.

The CFPB website does not provide any information about "pawnshops." For more details, please refer to CONSUMER FIN.

The Protection Bureau's website, http://www.consumerfinance.gov/, was last visited on November 25, 2012.

Many lenders, including pawnshops, now provide "title loans" where an automobile is used as collateral. However, our data does not include any automobile pledges. To learn more about title lending, refer to Hawkins (supra note 8) and the article by Nathalie Martin and Ozymandias Adams titled "Grand Theft Auto Loans: Repossession and Demographic Realities in Title Lending" published in 77 MO. L.

REV. 41 (2012) (discussing demographic trends in auto-title lending). 21 Bos, Carter & Skiba, supra note 3, at 2. 012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS  Table 2: Summary Statistics All Loans Percent Female Average Loan Duration Average Loan Amount 59. 59% 109 (140. 2) 79.

5 (90. 8) 201 Table 2 provides information on the proportion of pawn loans taken by females, as well as the average and standard deviation (in parentheses) of the loan duration and loan amount. The data is derived from a pawnshop lender in Texas during the period of 1997 to 2002. Approximately 49% of the

pawnshop loans in the dataset are secured with jewelry, with rings, including both men's and women's class and wedding rings, accounting for more than half of the items in the jewelry category. Following jewelry, televisions and electronics, such as satellite dishes, stereos, and CD players, are the next most common types of pledges.

Individuals often pawn a variety of items, including tools, small appliances, sporting equipment, guns, musical instruments, and camera equipment. The value of these collateral items is diverse, with guns having the highest average value at $146. Instruments and jewelry follow with average values of $117 and $96, respectively. Table 3 provides statistics for all categories, including the number of observations, percentage of observations, and loan amount. According to Table 3 in Review of Banking & Financial Law, there were 199,288 observations for loan amounts.

98% $96. 28 126,297 31,600 10552 7,833 7,734 7,700 4,052 3,666 31.68% 7.93% 2.65% and1.96%

The text includes numerical values and dollar amounts enclosed in HTML paragraph tags.

92 dollars and 75 cents, 146 dollars and 97 cents, 116 dollars and 92 cents, 75 dollars and 85 cents, and 51 dollars.

50 Vol. 32 Category Jewelry TVs / Electronics Tools / Equipment Household Items Missing Guns Instruments Camera / Equipment Misc. Standard Deviation 105.02 62.

34 60. 67 44. 7 72. 54 98.

Table 3 displays the count, percentage, average amount, and standard deviation of loans per collateral category. This information represents the number and details of items pawned for each category.

All amounts are in 2002 dollars. The sample of observations is from a pawnshop lender in Texas between 1997 and 2002. The items pawned vary based on the gender of the borrower. Jewelry

comprises over 60% of the items pawned by women, while electronics and tools are more commonly pawned by men, accounting for less than 35% of their items. IV.

Default The probability of repayment varies by the type of collateral, the gender of the borrower, and the value of the item. Figure 2 depicts the probability of repayment and default by the category of collateral. Instruments, guns, and jewelry are associated with the highest probability of repayment and lowest probability of default. The pawning of tools, household items, and miscellaneous items 2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS 203 (including clothes and medical equipment) leads to the highest probability of default and lowest probability of repayment. 2 We explore default dynamics more precisely using an ordinary least squares regression, measuring the probability of default as shown in the following linear probability model: (Equation 1) where Defaulti is an indicator variable that takes values 0 (repay) or 1 (default).

Y is a vector of collateral categories (excluding camera equipment), X is a vector of demographic categories, c represents a constant term, t corresponds to month and year dummies, and i denotes the error term. We cluster the standard errors at the individual level and, when necessary, at the store level in subsequent regressions. Table 4 presents the results. In this market, we assume the absence of adverse selection, where borrowers possess better knowledge of their default risks than lenders do.

Despite not doubting the importance of asymmetries in information, it has been demonstrated in the payday loan and subprime auto lending market. Adams, Einav & Levin (supra note 8), found evidence of adverse selection resulting from asymmetric information about default risk in

auto loan markets. Similarly, Dobbie & Skiba (supra note 8) found economically and statistically significant adverse selection into payday loans.
Dependent Variable: Default Electronics Guns Household Items Instruments 0. 021 (0. 0135) -0. 041** (0.

0161) 0. 055*** (0. 0160) 0. 055*** (0. 0172) -0. 028** (0.

0136) Tools Female White Black Hispanic Loan Amount 0.031** (0.0147) Jewelry Month x Year Effects Cluster at Individual Cluster at Store N adj. R-sq 387,223 0.

0032 X X X 387,223 0. 0169 X 387,223 0. 0032 X X 387,223 0. 0169 2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS 205 The category of camera equipment is excluded from the regressions, so the findings represent differences in other collateral categories compared to camera equipment. The results indicate that borrowers who pawn jewelry and instruments have the lowest default rates, even after accounting for demographic characteristics (gender and race) and loan size.

The likelihood of default is higher when pawning household items or tools compared to pawning camera equipment. The coefficients for the different merchandise categories are significantly different from each other at the 1% level, except for jewelry and instruments which are statistically different at the 5% level. Interestingly, controlling for loan characteristics, female borrowers have a 5.4 percentage points higher likelihood of default compared to male borrowers. Our findings demonstrate that using collateral such as jewelry or instruments, which may have a higher intrinsic value than their market price, increases the probability of loan repayment. This holds true even when considering loan and borrower characteristics, as well as the item's value. To delve further into this finding, we focus specifically on jewelry items that are likely to have sentimental value, such as class rings, wedding

rings, and engagement rings.

Borrowers may decide to pawn certain items as a means of motivating themselves to repay the loan, as discussed in the section on theoretical foundations. It is unlikely that these items are the only collateral option available to the borrower, considering pawnshops accept a wide range of assets. We analyze the likelihood of repayment for both sentimental and non-sentimental items, including wedding rings. Interestingly, a study by Professor Vissing-Jorgenson demonstrates that individuals who use credit to purchase luxury items are more prone to loan defaults in the context of credit default in Mexico. (Annette VissingJorgenson, "Consumer Credit: Learning Your Customer’s Default Risk from What (S)he Buys" 27 (Apr. 13, 2011) unpublished manuscript, available at http://papers.ssrn).

The study mentioned in https://www.ssrn.com/sol3/papers.cfm?abstract_id=2023238 showed that individuals who spend a significant portion of their income on luxury items are more likely to be higher risk borrowers. Therefore, credit providers may consider adjusting payment terms, interest rates, or both based on the previous purchase behavior of borrowers and the potential credit risk implied by their choices. This finding could have implications for loan decisions and risk assessment in the banking and financial law industry.

According to Figure 3, sentimental items such as 32 class rings, engagement rings, and "mother's" rings have a lower likelihood of default and a higher likelihood of loan repayment. To examine the impact of sentimentality, we conduct regression analysis on the probability of default, considering the loan amount, merchandise category indicators, and month-year dummies (as depicted in Equation 1). The findings of this regression can be found in Table 5.

When considering merchandise categories, gender, race, and loan amount, pawning an item with sentimental

value decreases the likelihood of default by 6 percentage points. The statistical significance of collateral categories and gender remains unchanged and the coefficients are similar. Pledging a specific item, like a sentimental ring, further reduces the probability of defaulting on the loan. In the following section, we will explore the economic theory behind these findings. It is important to note that pawnshops are often associated with fencing stolen items, and we cannot guarantee the ownership of each pledge. However, evidence suggests that only a small portion of pawned items are repossessed by law enforcement due to theft.

According to CASKEY (supra note 1, at 37–38), pawnshops do not usually function as fences for stolen goods. However, Professor Miles has found evidence that suggests pawnshops sometimes do serve as fences for stolen goods. Professor Miles' unpublished manuscript presented at the University of Michigan Law School Law and Economics Workshop, titled "Markets for Stolen Property: Pawnshops and Crime" (Jan. 24, 2008), is available at http://www.

law.umich.edu/centersandprograms/lawandeconomics/workshops/Documents/Winter2008/miles.pdf.
Additionally, due to the requirement of pawnshop borrowers to present a valid photo ID that is documented along with the pawnslip (and if available, the serial number of the pledge), and the mandatory practice of pawnshops to regularly send all pawnslips to local police (typically on a weekly basis), we are assured that most of the items being pawned are owned by their rightful owners. John P.

In his work titled "Pawnbroking in America: The Economics of a Forgotten Credit Market," Caskey (1991) argues that due to the police report requirement, it is not advantageous for a thief to pawn stolen goods. This idea is supported by data presented in Table 5 of the 2012-2013

report on pawnshops and behavioral economics, showing a negative correlation between certain factors.

062*** (0. 0046) 0. 0064 (0. 0131) -0.

0067 (0.0159) 0.041*** (0.0155) -0.038** (0.0166) -0.

038*** (0. 0132) 0. 036** (0. 0144) 0. 053*** (0. 0044) -0.

030 (0. 0223) 0. 0010 (0. 0220) 0. 015 (0. 0221) -0.

00023*** (0.0000) X X X X 395,032 0.0021 387,223 0.0178 395,032 0.0021 X 387,223 0.

0178 207 (1)Dependent Variable: Default Sentimental -0. 090*** (0. 0045) Electronics Guns Household Items Instruments Jewelry Tools Female White Black Hispanic Loan Amount (3) 0. 090*** (0. 0044) (4) -0.

062*** (0.044) 0.0064 (0.0132) -0.0067 (0.0158) 0.

041*** (0.0154) -0.038** (0.0177) -0.

The text within the is a list of numbers and parentheses.

0054) -0. 030 (0. 0238) 0. 0010 (0. 0241) 0.

015 (0. 0231) 0. 00023** * (0. 0000) X Month x Year Fixed Effects Cluster at Customer Cluster at Store Level N adj. R-sq 208 REVIEW OF BANKING & FINANCIALLAW Vol. 32 V.

In this section, we assess the Rational Economics and Behavioral Economics of Pawnbroking. Initially, we analyze our findings in relation to the traditional rational framework employed in economics for studying decision-making over time. Subsequently, we deviate from the standard assumptions of this classical rational model to investigate behavioral economics models of decision-making. These models aim to be more realistic and representative of human behavior. We evaluate all these models based on the evidence presented above regarding common drivers of default in the pawnshop market.

A. The canonical model of rational choice in economics, known as the exponential discounting model, assumes that individuals act to maximize a utility function. This utility function represents different potential choices' levels of happiness at each point

in time (or instant). The utility at time t is denoted as ut.

Time is a concept that can be quantified in various units such as years, months, days, or even instantaneously. However, we will focus on days as a natural way to measure time for our purposes. We can use this framework to represent the utility of any given day for an unlimited number of periods. When making decisions, individuals weigh the trade-off between the utilities of different days. For instance, when deciding when to complete homework, an individual compares the utility of doing it today (at time t) with the utility of doing it on any future date that meets certain criteria (such as completing it before the due date). It's worth noting that some time periods may come with additional costs, like the disutility of missing a night out with friends if homework is done on a Friday night.

Here is a recommended resource for a comprehensive review of the historical and recent theories on intertemporal choice in psychology and economics: Shane Frederick, George Loewenstein & Ted O’Donoghue's article titled "Time Discounting and Time Preference: A Critical Review" (2002) published in the Journal of Economic Literature (J. OF ECON. LITERATURE, 40, 351). The original foundations of this model can be found in Paul Samuelson's article titled "A Note on Measurement of Utility" (1937) published in the Review of Economic Studies (REV.OF ECON. STUDIES, 4, 155-156). According to Samuelson, individuals aim to maximize the sum of all future utilities by employing suitable time discounting techniques.

For an evaluation of work on discounted utility theory since then, please refer to Frederick et al., supra note 25, at

356–360. 25 Rational Model with Exponential Discounting 2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS 209 The trade-off of utility is not only influenced by opportunity costs, but also by the extent to which borrowers discount future utilities. This form of discounting assumes that borrowers accurately anticipate their future discounting, meaning they are time consistent. In other words, they know the choices that will maximize utility today and continue to make those same choices in the future. However, a drawback of exponential discounting is that it often conflicts with the way individuals actually make decisions.

7 The exponential model assumes that consumers discount rates between any two periods are constant. This means that the rate remains the same whether it is between today and tomorrow or 365 days and 365-plus-one days from now. Furthermore, the model assumes that consumers are aware of the rate at which they discount any of these periods. 29 Time consistency ensures that there is no room for procrastination or self-control problems. A drawback of this model is that utility gets heavily discounted very quickly. Even for high values of the discount rate, typically referred to as "delta" (indicating a patient person), such as 0.9, if we analyze discounting on a daily basis (which is a reasonable approach for considering choices in credit markets), the borrower would not place much importance on utility after one year.

The utility discount for that utility is 0.99365, approximately equal to 0.02. This means that borrowers value utility in one year 50 times less than utility today! For instance, a consumer would have no preference between receiving $10 today or $500 in a year. While exponential discounting may

be effective in theory and certain situations, it is not as applicable when dealing with shorter time frames. Given these disadvantages, one may question the suitability of using such a model.

Remember that this model, or a similar one, 27 referenced O’Donoghue & Rabin, supra note 10, at 125–26 ("[P]eople have self-control issues caused by a tendency to seek immediate gratification that their 'future selves' do not appreciate."). 28 Frederick et al. supra note 25, at 358 ("Constant discounting implies that a person's preferences over time .").

. . confirm earlier preferences. " ). 29 Id.

At 367.30, the value 1/.02 equals 50.210. This is important in understanding rational choice models in economics. Exponential discounting is used in many models and is a simplification of the real world. While it may not always accurately predict behavior, it is a useful starting point for considering choices over time.

32 Despite the exponential model having overwhelming evidence refuting it, 3 Paul Samuelson, the author of the canonical paper on the exponential discounting model, acknowledged its drawbacks and unrealistic predictions for behavior. 34 Nevertheless, economists both during Samuelson's time and today consider it a valuable starting point for thinking about economic concepts (See Stefano DellaVigna, Psychology and Economics: Evidence from the Field, 47 J. OF ECON.).

The literature on time inconsistency is discussed in various studies, including LITERATURE 315, 315 (2009), Stephan Meier & Charles D. Sprenger's Stability of Time Preferences 1–41 (Institute for the Study of Labor (IZA), Discussion Paper No. 756, 2010), Rabin's study (supra note 31, at 11–46), and Frederick et al.'s research.

, supra note 25, and references therein.
See also Jacob Goldin, Making Decisions About the Future: The

Discounted-Utility Model, 2 MIND MATTERS: WESLEYAN JOURNAL OF PSYCHOLOGY 49, 49–56 (2007) (“The many disparate factors that can affect one’s willingness to trade off between current and future satisfaction—e.g., patience or impatience, imagination of the future, anticipation, and memory—are summarized by a single number in the DU model—the discount rate[;].

However, simplicity-promoting factors may harm the accuracy of the model (as stated by "Exponential discounting can include very high discount rates where consumers care very little about the future, but consumers’ exhibiting different short-run and long-run time preferences cannot be accounted for with an exponential discount rate alone.").

According to David Laibson's article titled "Golden Eggs and Hyperbolic Discounting" published in the 1997 Quarterly Journal of Economics (Volume 112, pages 443-445), hyperbolic discount functions exhibit a higher discount rate for short-term horizons and a lower discount rate for long-term horizons. This type of discount structure creates a conflict between present preferences and future preferences.

33. According to DellaVigna (supra note 31, at 316–341), individuals in the laboratory exhibit time inconsistency, concern for others' welfare, and varying attitudes towards risk based on framing and reference point. They also violate rational expectations by overestimating their skills and overprojecting from the current state. Furthermore, they use heuristics to solve complex problems and are influenced by transient emotions in their decision-making process.

4. Samuelson (supra note 26, at 155–61) highlights significant limitations of the .

. . . analysis . . .

The text suggests that certain factors can undermine the theoretical perspective of exponential discounting. The author mentions that recent alternatives take into account more realistic elements that influence individuals' decision-making over time, including self-control issues, procrastination, and a mix of long-term patience and

short-term impatience. However, these factors do not align neatly with exponential discounting.

Returning to the context of the pawnshop, we can analyze what exponential discounting implies based on our data. In order for borrowers to fit into the rational choice model, they must feel additional discomfort from pawning an item that holds sentimental value. This is because the sentimental value increases the satisfaction the borrower gets from keeping the item. The borrower is then more likely to repay the loan in order to avoid experiencing this additional discomfort for a longer period of time, and potentially permanently if they default on the lo