Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey

Sule Alan, Mehmet Cemalcılar, Dean Karlan and Jonathan Zinman

No 20956, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The pricing and advertising of tied add-ons and overages have come under increasing scrutiny. Working with a large Turkish bank to test SMS direct marketing promotions to 108,000 existing holders of “free” checking accounts, we find that promoting a large discount on the 60% APR charged for overdrafts reduces overdraft usage. In contrast, messages mentioning overdraft availability without mentioning price increase usage. Neither change persists long after messages stop, suggesting that induced overdrafting is not habit-forming. We discuss implications for interventions to promote transparency in pricing and advertising, and for models of shrouded equilibria, limited attention, and salience.

JEL-codes: D12 D14 G02 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-ara and nep-cwa
Note: DEV LE LS
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey (2015)
Working Paper: Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey (2015)
Working Paper: Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey (2015)
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