Intermediary Commissions in a Regulated Market with Heterogeneous Customers
Bernardita Vial and
Pilar Alcalde
No 532, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.
Abstract:
Several studies predict that in markets with intermediation, changes in regulation intended to benefit consumers may have negative consequences for welfare when firms set commissions. We argue that, even if commissions are exogenous, transparent, and paid by customers, policies to diminish intermediaries’ bias may have nontrivial effects on equilibrium outcomes. We provide evidence from a highly regulated retirement market by examining two subsequent policy changesthat reduced the commission differential between products. Some of the patterns of the demand side are consistent with biased advice, but others are less intuitive. Our model helps understand these patterns and also predicts the firms’ equilibrium reaction to commission levels. We show that, in many cases, prices move in the opposite direction to the intermediaries’ bias: when intermediaries are cheaper and less biased, more customers follow their advice, making demand less elastic. This change induces firms to increase prices, producing nontrivial effects on welfare.
Date: 2020
New Economics Papers: this item is included in nep-com
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.economia.uc.cl/docs/doctra/dt-532.pdf (application/pdf)
Related works:
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:ioe:doctra:532
Access Statistics for this paper
More papers in Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile. Contact information at EDIRC.
Bibliographic data for series maintained by Jaime Casassus (jcasassus@uc.cl).