University of Nebraska - Lincoln DigitalCommons@University of Nebraska - Lincoln Dissertations, Theses, and Student Research from Business, College of the College of Business Summer 6-28-2018 THE EFFECTS OF IMMEDIATE AND DELAYED PAYMENTS ON CONSUMPTION BEHAVIOR Arvind Agrawal University of Nebraska - Lincoln Follow this and additional works at: http://digitalcommons.unl.edu/businessdiss Part of the Marketing Commons, and the Sales and Merchandising Commons Agrawal, Arvind, "THE EFFECTS OF IMMEDIATE AND DELAYED PAYMENTS ON CONSUMPTION BEHAVIOR" (2018). Dissertations, Theses, and Student Research from the College of Business. 56. http://digitalcommons.unl.edu/businessdiss/56 This Article is brought to you for free and open access by the Business, College of at DigitalCommons@University of Nebraska - Lincoln. It has been accepted for inclusion in Dissertations, Theses, and Student Research from the College of Business by an authorized administrator of DigitalCommons@University of Nebraska - Lincoln. THE EFFECTS OF IMMEDIATE AND DELAYED PAYMENTS ON CONSUMPTION BEHAVIOR by ARVIND AGRAWAL A DISSERTATION Presented to the Faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Doctor of Philosophy Major: Business (Marketing) Under the Supervision of Professor James W. Gentry Lincoln, Nebraska June, 2018 ii THE EFFECTS OF IMMEDIATE AND DELAYED PAYMENTS ON CONSUMPTION BEHAVIOR Arvind Agrawal, Ph.D. University of Nebraska, 2018 Advisor: James W. Gentry Payment-timing is conceptualized as a payment instrument focal characteristic to explain differences in consumers’ purchasing behavior when they chose to pay-now versus pay-later. Payment-timing preferences represent consumers’ attitudes, beliefs, and motivation for delaying or not delaying marketing transaction payments. Cash, debit cards, and online banking represented consumers’ preferences to pay-now, while credit cards and loans represented the inclination to pay-later. There were four key findings: Firstly, I present payment-timing models that theorize consumers’ choice of payment types with differences in payment-timing and motivations to pay for purchases. Two models are presented that unify the following attitudes and motivations: (1) five attitudinal antecedents to consumers’ preferences for payment-timing: regulatory focus, heuristics, self-construal, perceived financial constraint, and extent of financial literacy; (2) five motivations that explain consumers’ likelihood of purchase with payment types with differences in payment-timing: the pain of payment, pain of mismatched payments, rewards orientation, debt aversion, and decision construal; and (3) visualizing moral responsibility as a moderator to the pain of payment and economic motivation as a moderator to rewards availability. iii Secondly, consumers had a greater likelihood of purchasing when paying later (with credit cards) versus paying now (with debit cards) in the context of high-dollar purchases ($1200 and above). Moreover, when paying later consumers preferred quality purchases versus buying multiple items for an equivalent amount. Thirdly, there was no support found for the influence of the pain of payment on consumers’ purchase likelihood in the context of paying now with debit cards versus paying later with credit cards. Fourthly, external stimulation of consumers’ regulatory focus resulted in influencing their selection of payment types with differences in payment-timing and purchase likelihood. Promotion focus resulted in preferences to pay- later as compared to prevention focus that resulted in preferences to pay-now. Also, promotion focus led to a higher likelihood of purchase as compared to prevention focus. iv ACKNOWLEDGMENT I thank my adviser, Dr. Jim Gentry, who has been an inspiration and great support in my Ph.D. journey. He supported me to pursue a topic (payment-types) for my dissertation that is close to my heart. My thesis has answered questions I had as a result of my professional experience working in the payments industry. I thank my committee members, consisting of Dr. Les Carlson, Dr. Meike Eilert, and Dr. Scott Fuess who helped me shape the process of my investigation and gave me excellent feedback resulting in all the understanding I have today of conceptualizing, designing, analyzing, and structuring my investigations. My appreciation to my Ph.D. colleagues who went through tests of scales and reviewed my surveys to provide timely feedback. My dissertation would not have been complete without the able support and guidance of other faculty members, including Drs. Jamie Hyodo, Imran Khan, Alok Kumar, Andre Maciel, S. Sajeesh, Huanhuan Shi, and Ravi Sohi. I must thank Dr. Xin Zhao in whose seminar I first started exploring the cross-cultural influences of payment types. Dr. Amit Saini’s able guidance on my breadth review titled “Services Marketing” continues to be my go-to document for the literature review. My thanks to all my friends and wellwishers in Lincoln who encouraged my career change to academics. Finally, I must thank my family who supported me through the adjustments they had to make as I pursued academic life after over 35 years of professional experience. v TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1 The Rationale for Payment Type Research ........................................................................ 3 Purpose of This Research.................................................................................................... 5 Gaps Addressed by This Research ...................................................................................... 6 Theoretical Contributions ................................................................................................... 7 Managerial Contributions ................................................................................................. 10 Initial Research Questions ................................................................................................ 11 Organization of the Manuscript ........................................................................................ 15 CHAPTER 2: PAYMENT TYPE RESEARCH AND THEORETICAL OVERVIEW 19 Credit and Debit Card Differences ................................................................................... 19 Credit Cards Compared to Cash ....................................................................................... 22 Debit Cards Compared to Cash......................................................................................... 24 Psychological Processes Associated with Consumers’ Preference for Payment-timing .. 25 Conceptualizing Payment-timing...................................................................................... 28 Additional Support And Operationalization of Payment-timing Research ...................... 34 CHAPTER 3: CONSUMER PREFERENCES FOR PAYMENT-TIMING - A GROUNDED THEORY STUDY 37 Purpose of the Grounded Theory Phase............................................................................ 38 vi Grounded Theory Participants .......................................................................................... 39 Grounded Theory Procedure ............................................................................................. 41 Grounded Theory Analysis and Results ........................................................................... 42 CONCLUSIONS – GROUNDED THEORY QUALITATIVE RESEARCH 78 CHAPTER 4: PAYMENT-TIMING MAIN EFFECTS AND MEDIATION 80 Theory and Hypotheses..................................................................................................... 80 Payment-Timing Influence on Purchase Behavior ........................................................... 80 Mediating Role of the Pain of Payment ............................................................................ 82 STUDY 2A 84 Participants and Design..................................................................................................... 84 Procedure .......................................................................................................................... 86 Analysis and Results ......................................................................................................... 88 Additional Analysis – Study 2a ........................................................................................ 91 Ownership of CCs with and without rewards; DV = purchase intentions 92 STUDY 2B 98 Participants and Design..................................................................................................... 98 Procedure .......................................................................................................................... 99 Analysis and Results ......................................................................................................... 99 vii Additional Analysis ........................................................................................................ 103 Ownership of CCs with and without rewards; DV = purchase intentions 103 STUDY 3A 107 Participants and Design................................................................................................... 107 Procedure ........................................................................................................................ 110 Analysis and Results ....................................................................................................... 111 Main Effects of Payment Types .....................................................................................