Researchers as well as policymakers have expressed concerns that some contract features in the credit-card and subprime mortgage markets may induce consumers to borrow too much and to make suboptimal contract and repayment These concerns are motivated in part by intuition and evidence on savings and credit suggesting that consumers have a time-inconsistent taste for immediate gratification and often naïvely underestimate the extent of this Yet the formal relationship between a taste for immediate gratification and consumer behavior and welfare in the credit market remains largely unexplored and unclear
