Dynamic Competition in Negotiated Price Markets

Jason Allen & Shaoteng Li
"In many credit markets, prices are negotiated repeatedly. The final mortgage rate, for example, is rarely the posted price, but something that borrowers and lenders have bargained over. If borrowers are not satisfied with the rates their lenders propose, they need to search for and negotiate better offers. Borrowers often find it costly and inconvenient to switch lenders. The search and switching costs give incumbent lenders a clear advantage, allowing them to charge relatively high...
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