When firms' shrouding of charges, as in Gabaix and Laibson (2006), meets with consumers' salient thinking, as in Bordalo et al. (2013), this can have severe welfare implications. The ensuing excessive competition for headline prices tends to inefficiently bias consumers' choice towards...

We present a simple model of personal finance in which an incumbent lender has an information advantage vis-a-vis both potential competitors and households. In order to extract more consumer surplus, a lender with sufficient market power may engage in "irresponsible" lending, approving credit...