Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/188915 
Year of Publication: 
2018
Series/Report no.: 
Queen's Economics Department Working Paper No. 1403
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
We provide a framework for empirical analysis of negotiated-price markets. Using mortgage market data and a search and negotiation model, we characterize the welfare impact of search frictions and quantify the role of search costs and brand loyalty for market power. Search frictions reduce consumer surplus by $12/month/consumer, 28% of which can be associated with discrimination, 22% with ineifficient matching, and 50% with search costs. Large consumer-base banks have margins 70% higher than those with small consumer bases. The main source of this incumbency advantage is brand loyalty; however, price discrimination based on search frictions accounts for almost a third.
Subjects: 
Search costs
Brand loyalty
Bargaining
Mortgage Markets
JEL: 
L13
L41
L81
D43
D83
G21
Document Type: 
Working Paper

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