Price dispersion and consumer inattention: evidence from the market of bank accounts

This paper analyzes consumer inattention in the market of checking accounts. I examine the behavior of consumers who keep account tariffs that are dominated, i.e. that charge higher costs for any amount of bank services consumed through the account, by tariffs available at the same bank and introduced after the account was opened. I show that the probability of observing an inattentive consumer decreases with the dispersion of prices across tariffs of her bank. Moreover, consumers using services with the most dispersed prices across tariffs of their bank are less likely to be inattentive, while consumers using only services with the least dispersed prices are more likely to be inattentive. These results are consistent with decision-theoretic models in which consumers focus their attention on attributes which differ more across options and can be useful to improve consumer choice in this market.