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Exploiting old customers and attracting new ones: The case of bank deposit pricing

Santiago Carbo-Valverde, Timothy Hannan and Francisco Rodriguez-Fernandez
Authors registered in the RePEc Author Service: Santiago Carbo Valverde and Francisco Rodríguez Fernández ()

European Economic Review, 2011, vol. 55, issue 7, 903-915

Abstract: Recent theoretical contributions suggest that deposit interest rates should be higher in geographic areas characterized by greater in-migration and lower for depositors at banks with greater shares of existing (or so-called “locked-in”) depositors. These hypotheses are tested using a rich data set obtained for the Spanish banking industry. Results confirm that, all else equal, banks offer higher deposit rates in territories characterized by greater in-migration, and also that they tend to offer lower rates, the larger the number of their locked-in depositors. These findings confirm the existence of the trade-off between exploiting old customers and attracting new ones.

Keywords: Deposit pricing; In-migration; Locked-in customers (search for similar items in EconPapers)
JEL-codes: G21 L11 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:55:y:2011:i:7:p:903-915

DOI: 10.1016/j.euroecorev.2011.02.001

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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