Payday Loan Pricing

Networks Financial Institute 2006-WP-05 (revised version)

FRB of Kansas City Paper No. RWP 09-07

48 Pages Posted: 11 Dec 2007 Last revised: 12 Mar 2013

See all articles by Robert DeYoung

Robert DeYoung

University of Kansas School of Business

Ronnie J. Phillips

Colorado State University

Date Written: January 14, 2009


We estimate the pricing determinants for 35,098 payday loans originated in Colorado between 2000 and 2006, and generate a number of results with implications for public policy. We find evidence consistent with classical price competition early in the sample, but as time passed these competitive effects faded and the data become more consistent with a variety of strategic pricing practices. On average, loan prices moved upward toward the legislated price ceiling over time, consistent with implicit collusion facilitated by price focal points. Large multi-store payday firms tended to charge higher prices than independent single-store operators, but were less likely to exploit inelastic demand near military bases and in largely minority neighborhoods. Of the three loan pricing measures used in our analysis, the annual percentage interest rate (APR) favored by regulators and analysts performed poorly.

Keywords: payday lending, price ceilings, strategic pricing

JEL Classification: G21, D14

Suggested Citation

DeYoung, Robert and Phillips, Ronnie J., Payday Loan Pricing (January 14, 2009). Networks Financial Institute 2006-WP-05 (revised version), FRB of Kansas City Paper No. RWP 09-07, Available at SSRN: or

Robert DeYoung (Contact Author)

University of Kansas School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-1806 (Phone)

Ronnie J. Phillips

Colorado State University ( email )

Fort Collins, CO 80523-1771
United States


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