Search cost and price dispersion in vertically related markets: the case of bank loans and deposits

Alfredo Martin-Oliver, Vicente Salas-Fumás () and Jesús Saurina ()
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Vicente Salas-Fumás: Universidad de Zaragoza

No 825, Working Papers from Banco de España

Abstract: Using data on marginal interest rates of loan and deposit products by Spanish banks, we find that the level of interest rates on loans (deposits) across geographic markets decrease (increase) with the number of banks in each market, and that the level of interest rates on loans increases with the level of interest rates of deposits. We also find that the dispersion of interest rates of both loans and deposits increase with the number of banks. This evidence is interpreted as evidence of customer’s search costs in retail banking, consistent with predictions from the Carlson and McAfee (1983) model of market competition with search costs.

Keywords: Interest rate dispersion; market structure; search costs (search for similar items in EconPapers)
JEL-codes: D83 G21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-11
New Economics Papers: this item is included in nep-ban and nep-com
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Citations: View citations in EconPapers (10)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/08/Fic/dt0825e.pdf First version, November 2008 (application/pdf)

Related works:
Journal Article: Search Cost and Price Dispersion in Vertically Related Markets: The Case of Bank Loans and Deposits (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0825

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