Is Lending Discrimination Always Costly?

Michael F Ferguson and Stephen R Peters

The Journal of Real Estate Finance and Economics, 2000, vol. 21, issue 1, 23-44

Abstract: How can economically costly discrimination persist in a competitive market? Previous research into this question has focused on market imperfections which prevent competitive forces from eliminating the economically costly behavior. In this paper we show that lending discrimination is not always costly (to the lender). This has two important implications. First, lending discrimination may persist indefinitely, even in a competitive market. Second, tests for lending discrimination based on profits (or default rates) may be unable to detect discrimination when it exists. Copyright 2000 by Kluwer Academic Publishers

Date: 2000
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