eprintid: 10204808
rev_number: 17
eprint_status: archive
userid: 699
dir: disk0/10/20/48/08
datestamp: 2025-02-17 11:08:52
lastmod: 2025-03-17 22:28:46
status_changed: 2025-03-17 22:28:46
type: article
metadata_visibility: show
sword_depositor: 699
creators_name: Hamill, Conor Brian
creators_name: Khraishi, Raad
creators_name: Gherghel, Simona
creators_name: Lawrence, Jerrard
creators_name: Mercuri, Salvatore
creators_name: Okhrati, Ramin
creators_name: Cowan, Greig Alan
title: Agent-based modelling of credit card promotions
ispublished: pub
divisions: UCL
divisions: B04
divisions: F44
keywords: Agent-based modelling, Business, Business & Economics, Credit card pricing, Credit card promotions, DEBT, PRICES, RISK, SIMULATION, Social Sciences
note: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
abstract: Purpose: Interest-free promotions are a prevalent strategy employed by credit card lenders to attract new customers, yet the research exploring their effects on both consumers and lenders remains relatively sparse. Selecting an optimal promotion strategy is intricate, involving the determination of an interest-free period duration and promotion-availability window, all within the context of market dynamics and complex consumer behaviour. The purpose of this study is to develop an agent-based model to assist with determining optimal promotion strategies. Design/methodology/approach: In this paper, we introduce a novel agent-based model that facilitates the exploration of various credit card promotions under diverse market scenarios. Findings: Our experiments reveal that, in the absence of competitor promotions, lender profit is maximised by an interest-free duration of approximately 12 months, while market share is maximised by offering the longest duration possible. In the context of concurrent interest-free promotions, we identify that the optimal lender strategy entails offering a more competitive interest-free period and a rapid response to competing promotional offers. Notably, a delay of three months in responding to a rival promotion corresponds to a 2.4% relative decline in income. Originality/value: Our model consists of multiple lender and consumer agents that interact through a novel set of mechanisms based on well-studied consumer behaviours. Distinct from previous works, our model adopts a realistic billing cycle with a focus on interest charged to revolving accounts and supports a range of lender promotion strategies. It is calibrated to historical benchmarks and validated against both stylised facts and time-series data, ensuring a realistic reflection of market behaviour, which has been neglected in prior studies.
date: 2025-03-07
date_type: published
publisher: Emerald
official_url: https://doi.org/10.1108/ijbm-02-2024-0082
oa_status: green
full_text_type: other
language: eng
primo: open
primo_central: open_green
verified: verified_manual
elements_id: 2354262
doi: 10.1108/IJBM-02-2024-0082
lyricists_name: Okhrati, Ramin
lyricists_id: ROKHR99
actors_name: Okhrati, Ramin
actors_id: ROKHR99
actors_role: owner
funding_acknowledgements: [Graham Smith and Zachery Anderson of NatWest Group]
full_text_status: public
publication: International Journal of Bank Marketing
volume: 43
number: 4
pagerange: 849-870
pages: 22
issn: 0265-2323
citation:        Hamill, Conor Brian;    Khraishi, Raad;    Gherghel, Simona;    Lawrence, Jerrard;    Mercuri, Salvatore;    Okhrati, Ramin;    Cowan, Greig Alan;      (2025)    Agent-based modelling of credit card promotions.                   International Journal of Bank Marketing , 43  (4)   pp. 849-870.    10.1108/IJBM-02-2024-0082 <https://doi.org/10.1108/IJBM-02-2024-0082>.       Green open access   
 
document_url: https://discovery.ucl.ac.uk/id/eprint/10204808/1/Okhrati_ABM_IJBM_final_manuscript.pdf