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

Sule Alan (), Mehmet Cemalcilar, Dean Karlan () and Jonathan Zinman ()

No 198558, Center Discussion Papers from Yale University, Economic Growth Center

Abstract: Models of shrouding predict that firms lack incentives to compete on add-on prices. Working with a large Turkish bank to test SMS direct marketing promotions to 108,000 existing checking account holders, we find that messages promoting a large discount on the overdraft interest rate reduce overdraft usage. In contrast, messages that mention overdraft availability without mentioning price increase usage. Neither change persists long after messages stop, suggesting that induced overdrafting is not habit-forming. Our results are consistent with a model of limited memory and attention.

Keywords: Consumer/Household Economics; Financial Economics; Institutional and Behavioral Economics; International Development; Labor and Human Capital; Marketing; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 40
Date: 2015-01
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https://ageconsearch.umn.edu/record/198558/files/cdp1044_1_.pdf (application/pdf)

Related works:
Working Paper: Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey (2015) Downloads
Working Paper: Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey (2015) Downloads
Working Paper: Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:yaleeg:198558

DOI: 10.22004/ag.econ.198558

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