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Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees

Author Info

Listed author(s):
  • Victor Stango
  • Jonathan Zinman

Abstract

We explore dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a "stock" of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Individuals avoid overdrafts by making fewer low-balance debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy.

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File URL: http://www.nber.org/papers/w17028.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17028.

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Date of creation: May 2011
Publication status: published as Limited and Varying Consumer Attention Evidence from Shocks to the Salience of Bank Overdraft Fees Victor Stango Graduate School of Management, University of California–Davis Jonathan Zinman Rev. Financ. Stud. (2014) doi: 10.1093/rfs/hhu008
Handle: RePEc:nbr:nberwo:17028
Note: LE
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Find related papers by JEL classification:
  • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
  • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
  • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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  1. Kolko, Jed, 2010. "A new measure of US residential broadband availability," Telecommunications Policy, Elsevier, vol. 34(3), pages 132-143, April.
  2. Zwane, A. P. & Zinman, J. & Van Dusen, E. & Pariente, W. & Null, C. & Miguel, E. & Kremer, Michael R. & Karlan, D. S. & Hornbeck, Richard A. & Gine, X. & Duflo, E. & Devoto, F. & Crepon, B. & Banerjee, 2011. "Being Surveyed Can Change Later Behavior and Related Parameter Estimates," Scholarly Articles 11339433, Harvard University Department of Economics.
  3. Marianne Bertrand & Dean Karlin & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," NBER Working Papers 11892, National Bureau of Economic Research, Inc.
  4. Nicola Lacetera & Devin G. Pope & Justin R. Sydnor, 2012. "Heuristic Thinking and Limited Attention in the Car Market," American Economic Review, American Economic Association, vol. 102(5), pages 2206-2236, August.
  5. Dean Karlan & Sendhil Mullainathan & Margaret McConnell & Jonathan Zinman, 2010. "Getting to theTop of Mind: How Reminders Increase Saving," Working Papers id:2587, eSocialSciences.
  6. Kfir Eliaz & Ran Spiegler, 2011. "Consideration Sets and Competitive Marketing," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 235-262.
  7. Lusardi, Annamaria & Tufano, Peter, 2015. "Debt literacy, financial experiences, and overindebtedness," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(04), pages 332-368, October.
  8. Jonathan Zinman, 2009. "Where Is The Missing Credit Card Debt? Clues And Implications," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 249-265, 06.
  9. Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 505-540.
  10. Austan Goolsbee, 2000. "In a World Without Borders: The Impact of Taxes on Internet Commerce," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 561-576.
  11. Sumit Agarwal & John C Driscoll & Xavier Gabaix & David Laibson, 2008. "Learning in the Credit Card Market," Levine's Working Paper Archive 122247000000002028, David K. Levine.
  12. Marianne Bertrand & Dean Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2010. "What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 263-306.
  13. Jeffrey T. Prince, 2008. "Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of Demand for Personal Computers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 1-33, 03.
  14. Victor Stango & Jonathan Zinman, 2009. "What Do Consumers Really Pay on Their Checking and Credit Card Accounts? Explicit, Implicit, and Avoidable Costs," American Economic Review, American Economic Association, vol. 99(2), pages 424-429, May.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Inattention and bank overdrafts
    by Economic Logician in Economic Logic on 2011-06-21 13:48:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:

  1. Gilbert, Ben & Graff Zivin, Joshua, 2014. "Dynamic salience with intermittent billing: Evidence from smart electricity meters," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 176-190.
  2. Mark Armstrong & John Vickers, 2012. "Consumer Protection and Contingent Charges," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 477-493, June.
  3. Stephanie M. Wilshusen, 2011. "Meeting the demand for debt relief," Payment Cards Center Discussion Paper 11-04, Federal Reserve Bank of Philadelphia.
  4. Pon, Shirley, 2015. "Effectiveness of Real Time Information Provision with Time of Use Pricing," FCN Working Papers 8/2015, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Oct 2015.
  5. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, 03.
  6. Alberto Chong & Dean Karlan & Jeremy Shapiro & Jonathan Zinman, 2015. "(Ineffective) Messages to Encourage Recycling: Evidence from a Randomized Evaluation in Peru," World Bank Economic Review, World Bank Group, vol. 29(1), pages 180-206.
  7. Kast, Felipe & Meier, Stephan & Pomeranz, Dina, 2012. "Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device," IZA Discussion Papers 6311, Institute for the Study of Labor (IZA).
  8. Englmaier, Florian & Roider, Andreas & Sunde, Uwe, 2012. "The Role of Salience in Performance Schemes: Evidence from a Field Experiment," CEPR Discussion Papers 8921, C.E.P.R. Discussion Papers.
  9. Melzer, Brian T. & Morgan, Donald P., 2015. "Competition in a consumer loan market: Payday loans and overdraft credit," Journal of Financial Intermediation, Elsevier, vol. 24(1), pages 25-44.

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

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