2 Works

Price Negotiation in Differentiated Products Markets: Evidence from the Canadian Mortgage Market

Jason Allen, Robert Clark & Jean-François Houde
This paper measures market power in a decentralized market where contracts are determined through a search and negotiation process. The mortgage industry has many institutional features which suggest competitiveness: homogeneous contracts, negotiable rates, and, for a given consumer, common lending costs across lenders. As a result, even with a small number of lenders, informed borrowers can gather multiple quotes. However, there is important heterogeneity in the ability of consumers to understand the subtleties of financial...

Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage Lending

Jason Allen, Robert Clark & Jean-François Houde
This paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process. The primary effect of a merger therefore is to reduce the number of partners available with whom to negotiate, although it can also change the characteristics of the product, and impact the search effort of consumers. Using...

Registration Year

  • 2021
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Affiliations

  • École des Hautes Études Commerciales
    2
  • Bank of Canada
    2
  • University of Pennsylvania
    1
  • University of Wisconsin–Madison
    1