What Shapes Consumer Choice and Financial Products? A Review

Central to the field of consumer finance is that consumers make financial decisions that do not always coincide with the financial decisions ideally depicted in optimal economic models. In this review, we discuss developments in the field of household finance, focusing on how consumers make suboptimal financial decisions across different types of settings and factors that affect their decisions. Rather than conducting a comprehensive survey, we focus specifically on consumer choice in the context of research on credit card borrowing, housing and mortgage debts, investment and savings decisions, and spending and consumption. We also discuss financial product design and marketing, as well as the regulatory landscape of lenders of consumer financial products. We present five future research directions and considerations for researchers and policymakers.