Liquidity Flypaper Effect

What it is

Marco Di Maggio, Emily C. Williams and Justin Katz found that access to buy now, pay later raised total spending and the retail share of spending, by amounts too large for standard intertemporal and static substitution effects to explain, for consumers with and without inferred liquidity constraints, and read the pattern as more consistent with a liquidity flypaper effect than with a standard lifecycle model.

In effect

The article on buy now, pay later uses it as the reading of the transaction-level panel.

What it does not say

It is the authors' interpretation of patterns in transaction data from a working paper. It describes average responses, not what any one user does.

---