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Unshrouding: Evidence from Bank Overdrafts in Turkey

Alan, Sule and Cemalcilar, Mehmet and Karlan, Dean and Zinman, Jonathan (2018) 'Unshrouding: Evidence from Bank Overdrafts in Turkey.' The Journal of Finance. ISSN 0022-1082

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Abstract

Lower prices produce higher demand… or do they? A bank's direct marketing to holders of “free” checking accounts shows that a large discount on 60% APR overdrafts reduces overdraft usage, especially when bundled with a discount on debit card or auto-debit transactions. In contrast, messages mentioning overdraft availability without mentioning price increase usage. Neither change persists long after the messages stop. These results do not square easily with classical models of consumer choice and firm competition. Instead they support behavioral models where consumers underestimate and are inattentive to overdraft costs, and firms respond by shrouding overdraft prices in equilibrium.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Elements
Date Deposited: 08 Mar 2018 16:45
Last Modified: 08 Mar 2018 16:45
URI: http://repository.essex.ac.uk/id/eprint/21509

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