Search Frictions and Market Power in Negotiated Price Markets

Jason Allen, Robert Clark and Jean-François Houde

No 19883, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops and estimates a search and bargaining model designed to measure the welfare loss associated with frictions in oligopoly markets with negotiated prices. We use the model to quantify the consumer surplus loss induced by the presence of search frictions in the Canadian mortgage market, and evaluate the relative importance of market power, inefficient allocation, and direct search costs in explaining the loss. Our results suggest that search frictions reduce consumer surplus by almost $20 per month per consumer, and that 17% of this reduction can be associated with discrimination, 30% with inefficient matching, and the remainder with the search cost.

JEL-codes: L13 L41 L81 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-com, nep-dge and nep-ind
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Citations: View citations in EconPapers (19)

Published as Jason Allen & Robert Clark & Jean-François Houde, 2019. "Search Frictions and Market Power in Negotiated-Price Markets," Journal of Political Economy, vol 127(4), pages 1550-1598.

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Related works:
Journal Article: Search Frictions and Market Power in Negotiated-Price Markets (2019)
Working Paper: Search Frictions And Market Power In Negotiated Price Markets (2018)
Working Paper: Price Negotiation in Differentiated Products Markets: Evidence from the Canadian Mortgage Market (2012)
Working Paper: Price negotiation in differentiated product markets: An analysis of the market for insured mortgages in Canada (2010)
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