Credit card rates and consumer search

Mitchell Berlin and Loretta Mester

Review of Financial Economics, 2004, vol. 13, issue 1-2, 179-198

Abstract: Credit card rates have tended to be higher and stickier than other loan rates but have fallen over the past decade. Some argue this decline is due to a reduction in consumer search costs. Our evidence suggests search costs are not the best explanation for the decline. We test whether consumer search models explained credit card pricing in the 1980s when search costs were thought to be significant. We find that the distributions of rates were inconsistent with those derived from many models of search. Proposals for stricter disclosure requirements may have less effect on equilibrium credit card rates than intended.

Date: 2004
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https://doi.org/10.1016/j.rfe.2003.06.001

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Journal Article: Credit card rates and consumer search (2004)
Working Paper: Credit card rates and consumer search (1987)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:13:y:2004:i:1-2:p:179-198

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