Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees
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.
Thanks to the Filene Research Institute, the Rockefeller Center at Dartmouth College, and UC-Davis for funding. Thanks to Iwan Barankay, Wilko Bolt, Brianna Cardiff, Stefano DellaVigna, Bob Hunt, Ulrike Malmendier, Paul Oyer, Karen Pence, Julio Rotemberg, Marc Rysman, Scott Schuh, Nick Souleles, and conference/seminar participants at the 2011 AEA meetings, the FTC/Northwestern Micro Conference, Kellogg, NBER Behavioral Economics, NBER Law and Economics, RAND, UC-Boulder, UCLA, and the Federal Reserve Banks of Boston, Chicago, New York, and Philadelphia for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Victor Stango & Jonathan Zinman, 2014. "Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees," Review of Financial Studies, vol 27(4), pages 990-1030. citation courtesy of