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

Alan, Sule; Cemalcilar, Mehmet; Karlan, Dean; Zinman, Jonathan

doi:10.2139/ssrn.2564672

Cited by 9 publications

(13 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Investors are more sensitive to mutual fund front-end loads than to ongoing costs embedded in the expense ratio (Barber et al, 2005, although see Christoffersen et al, 2013). Making salient the existence of a 50% discount on overdraft fees reduces overdraft usage, consistent with customers overlooking the fact that overdrafts have a positive price, whereas making salient the availability of overdrafts without mentioning their cost increases usage (Alan et al, 2016). In general, marketing raises demand for financial products and lowers their price elasticity of demand; Hastings et al (2017) demonstrate these effects in the Mexican mutual fund market.…”

Section: Product Designmentioning

confidence: 99%

Behavioral Household Finance

Beshears

Choi

Laibson

et al. 2018

View full text Add to dashboard Cite

This chapter provides an overview of household finance. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: consumption and savings, borrowing, payments, asset allocation, and insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: education and information, peer effects and social influence, product design, advice and disclosure, choice architecture, and interventions that directly target prices or quantities. This chapter is divided into two parts, each of which is further divided into several sections. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing both extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: (I) consumption and savings, (II) borrowing, (III) payments, (IV) asset allocation, and (V) insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: (VI) education and information, (VII) peer effects and social influence, (VIII) product design, (IX) advice and disclosure, (X) choice architecture, and (XI) interventions that directly target prices or quantities. The final section of the paper (XII) concludes. John BeshearsWe offer broad coverage of the household finance literature, but we limit the scope of our discussion along some dimensions. We focus on the U.S. institutional context and on empirical work based on U.S. data, although we do bring evidence from other wealthy countries to bear when germane and occasionally reference evidence from developing countries. We address household asset allocation but do not draw out its implications for asset pricing, which are covered by the asset pricing chapter in this handbook. Although household decisions regarding health care are relevant to household finance, we largely omit this literature from our chapter because it is covered in depth in the chapter on behavioral health economics. Finally, there is some overlap between our section on financial product design and the chapter on behavioral industrial organization; we refer readers to that chapter for related material on that topic. Part 1: Facts I. Consumption and SavingsBeginning with the seminal work of Modigliani and Brumberg (1954) and Friedman (1957), economists have embraced the view that households choose to save and borrow to smooth consumption over the lifecycle. Intuitively, if agents have concave utility functions over consumption, then they should spread consumption across time to optimally...

show abstract

Section: Product Designmentioning

confidence: 99%

Behavioral Household Finance

Beshears

Choi

Laibson

et al. 2018

View full text Add to dashboard Cite

show abstract

“…4 Ponce et al (2014), Stango and Zinman (2015). 5 See, e.g., Agarwal et al (2013); ; Alan et al (2015); Stango and Zinman (2009;.…”

mentioning

confidence: 99%

Borrowing High versus Borrowing Higher: Price Dispersion and Shopping Behavior in the U.S. Credit Card Market

2015

Self Cite

View full text Add to dashboard Cite

We document substantial cross-individual dispersion in U.S. credit card borrowing costs, even after controlling for borrower risk and card characteristics. That remaining dispersion arises because cross-lender pricing heterogeneity generates dispersion in APR offers to borrowers, and borrowers vary in shopping intensity. Our empirics match administrative data to self-reported card shopping intensity, and use instruments suggested by Fair Lending law to account for the endogeneity between APRs and search. The results show that shoppers and nonshoppers pay APRs as different as those paid by borrowers in the best and worst credit score deciles. We discuss implications for policy and practice.

show abstract

“…In recent work, Alan et al. () worked with a Turkish bank to send marketing messages about overdrafts to existing customers. Simply promoting the availability of overdraft services (without mentioning costs) increased overdraft usage, compared with messages that did not mention overdrafts.…”

Section: Contracting With Irrational Borrowersmentioning

confidence: 99%

Is the Credit Worth It? For‐profit Lenders in Microfinance With Rational and Behavioral Borrowers

Quidt¹,

Ghatak

2018

Ann Public Coop Econ

View full text Add to dashboard Cite

The bulk of the literature on microcredit has focused on either notfor-profit lenders or assumes a perfectly competitive, zero-profit market equilibrium. Yet the market has experienced a significant shift toward for-profit lending and the assumptions of perfect competition are likely to be too strong in many locations. We review the state of the literature on for-profit lending in microcredit, consider its implications for both conventionally 'rational' borrowers and for borrowers with behavioral biases, and point out directions for future research.

show abstract

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

Cited by 9 publications

References 31 publications

Behavioral Household Finance

Behavioral Household Finance

Borrowing High versus Borrowing Higher: Price Dispersion and Shopping Behavior in the U.S. Credit Card Market

Is the Credit Worth It? For‐profit Lenders in Microfinance With Rational and Behavioral Borrowers

Contact Info

Product

Resources

About