Business Economics and Public Policy Papers
Document Type
Journal Article
Date of this Version
9-2014
Publication Source
The Journal of Industrial Economics
Volume
62
Issue
3
Start Page
377
Last Page
416
DOI
10.1111/joie.12046
Abstract
Using transaction-level data on Canadian mortgage contracts, we document an increase in the average discount negotiated off the posted price and in rate dispersion. Our aim is to identify the beneficiaries of discounting and to test whether dispersion is caused by price discrimination. The standard explanation for dispersion in credit markets is risk-based pricing. Our contracts are guaranteed by government-backed insurance, so risk cannot be the main factor. We find that lenders set prices that reflect consumer bargaining leverage, not just costs. The presence of dispersion implies a lack of competition, but our results show this to be consumer specific.
Copyright/Permission Statement
This is the peer reviewed version of the following article: Jason Allen, Robert C. Clark, Jean-François Houde (2013), Price dispersion in mortgage markets, Journal of Industrial Economics, 62, 377-416, which has been published in final form at http://dx.doi.org/10.1111/joie.12046. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
Recommended Citation
Allen, J., Clark, R., & Houde, J. (2014). Price Dispersion in Mortgage Markets. The Journal of Industrial Economics, 62 (3), 377-416. http://dx.doi.org/10.1111/joie.12046
Date Posted: 27 November 2017
This document has been peer reviewed.