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.

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Date Posted: 27 November 2017

This document has been peer reviewed.