EconPapers    
Economics at your fingertips  
 

Switching Cost and Deposit Demand in China

Chun-Yu Ho

No 62014, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper develops and estimates a dynamic model of consumer demand for deposits in which banks provide differentiated products and product characteristics that evolve over time. Existing consumers are forward-looking and incur a fixed cost for switching banks, whereas incoming consumers are forward-looking but do not incur any cost for joining a bank. The main finding is that consumers prefer banks with more employees and branches. The switching cost is approximately 0.8% of the deposit's value, which leads the static model to bias the demand estimates. The dynamic model shows that the price elasticity over a long time horizon is substantially larger than the same elasticity over a short time horizon. Counterfactual experiments with a dynamic monopoly show that reducing the switching cost has a comparable competitive effect on bank pricing as a result of reducing the dominant position of the monopoly.

Keywords: Banks in China; Demand Estimation; Switching Cost (search for similar items in EconPapers)
JEL-codes: G21 L10 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-03
New Economics Papers: this item is included in nep-ban, nep-com and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.hkimr.org/uploads/publication/377/wp-no-06_2014-final-.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/377/wp-no-06_2014-final-.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/377/wp-no-06_2014-final-.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/377/wp-no-06_2014-final-.pdf)

Related works:
Journal Article: SWITCHING COST AND DEPOSIT DEMAND IN CHINA (2015) Downloads
Working Paper: Switching cost and deposit demand in China (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:062014

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().

 
Page updated 2025-03-22
Handle: RePEc:hkm:wpaper:062014