Information or persuasion in the mortgage market: the role of brand names

Agnese Carella () and Valentina Michelangeli
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Agnese Carella: Bank of Italy

No 1340, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The role, informative or persuasive, of brand names in driving purchasing decisions is very much under debate. We exploit the rebranding of a mortgage lender to analyse households’ choice behaviour in response to brand popularity. Loan-level data on new mortgages suggest that (1) brand awareness reduces the equilibrium price of residential mortgage contracts and (2) the reduction mainly reflects consumers’ selection of cheaper products due to better information. Our calibrated model implies an overall gain equal to 6 per cent of the initial loan amount and a roughly 10 percentage point increase in the share of households that shift to cheaper lenders.

Keywords: brand; mortgages; household finance (search for similar items in EconPapers)
JEL-codes: D12 D15 D83 G21 G51 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ban, nep-eur, nep-ipr, nep-pay and nep-ure
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Citations: View citations in EconPapers (2)

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