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

43 Pages Posted: 17 Feb 2015

See all articles by Sule Alan

Sule Alan

University of Essex - Department of Economics

Mehmet Cemalcılar

Yapi Kredi Bank A.S.

Dean S. Karlan

Yale University; Northwestern University - Kellogg School of Management; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Jonathan Zinman

Dartmouth College; Innovations for Poverty Action; Jameel Poverty Action Lab; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: February 2015

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: advertising, consumer banking, contingent charges, deposit accounts, habit formation, limited attention, retail banking, salience

JEL Classification: D12, D14, G2

Suggested Citation

Alan, Sule and Cemalcılar, Mehmet and Karlan, Dean S. and Karlan, Dean S. and Zinman, Jonathan, Unshrouding Effects on Demand for a Costly Add-On: Evidence from Bank Overdrafts in Turkey (February 2015). CEPR Discussion Paper No. DP10414, Available at SSRN: https://ssrn.com/abstract=2566317

Sule Alan (Contact Author)

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Mehmet Cemalcılar

Yapi Kredi Bank A.S. ( email )

Buyukdere Cad. YKB Plaza
Istanbul, Istanbul 34330
Turkey
+90 212 339 6223 (Phone)

Dean S. Karlan

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Innovations for Poverty Action ( email )

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jonathan Zinman

Dartmouth College ( email )

Hanover, NH 03755
United States
603-646-0075 (Phone)

HOME PAGE: http://https://sites.dartmouth.edu/jzinman/

Innovations for Poverty Action

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

Jameel Poverty Action Lab

E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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