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Maverick Firms: An Exploratory Analysis of Mortgage Providers in Australia

Robert Breunig () and Flavio Menezes

No 348, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper develops an empirical strategy to measure maverick-like behaviour. It applies the strategy to a dataset that contains interest rates charged by mortgage providers in Australia from January 2003 to October 2006. The Reserve Bank of Australia raised its cash rate five times in this period, which provides a natural setting to observe suppliers� responses. We examine suppliers� behaviour both in terms of the rates they charge and the time it takes them to change their rates as a response to a systemic increase in costs. These empirical observations suggest that the development of a theory for maverick behaviour be focused on dynamic, asymmetric models and informed by institutions and market dynamics that are relevant to the case at hand.

Date: 2007
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