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

Sule Alan, Dean Karlan, Mehmet Cemalcilar () and Jonathan Zinman
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Mehmet Cemalcilar: Yapi Kredi Bank, Istanbul Turkey

Working Papers from Economic Growth Center, Yale University

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: contingent charges; limited attention; salience; advertising; habit formation; consumer banking; retail banking; deposit accounts (search for similar items in EconPapers)
JEL-codes: D12 D14 G2 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2015-01
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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