Search Frictions And Market Power In Negotiated Price Markets

Jason Allen, Robert Clark and Jean-Francois Houde ()
Additional contact information
Jean-Francois Houde: Cornell University and NBER

No 1403, Working Paper from Economics Department, Queen's University

Abstract: We provide a framework for empirical analysis of negotiated-price markets. Using mortgage market data and a search and negotiation model, we characterize the welfare impact of search frictions and quantify the role of search costs and brand loyalty for market power. Search frictions reduce consumer surplus by $12/month/consumer, 28% of which can be associated with discrimination, 22% with ineifficient matching, and 50% with search costs. Large consumer-base banks have margins 70% higher than those with small consumer bases. The main source of this incumbency advantage is brand loyalty; however, price discrimination based on search frictions accounts for almost a third.

Keywords: Martgage markets; Search costs; Brand loyalty; Bargaining (search for similar items in EconPapers)
JEL-codes: D43 D83 G21 L13 L41 L71 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-03
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1403.pdf First version 2018 (application/pdf)

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 (2014)
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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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1403

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