Abstract
In markets with switching costs, firms increase their price as their market share grows. I study the effect of entry on these price dynamics in the Dutch mortgage market. Since en- try occurred in a subset of markets, I control for market-level shocks with a differences-in- differences strategy. Moreover, I exploit the multi-product nature of incumbents to control for unobserved firm-level differences. Consistent with a simple theoretical framework, banks with more locked-in customers decrease their interest rates less after entry. This can explain why policies that encourage competition often disappoint in markets with switching costs. I also discuss implications for competition policy.
Original language | English |
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Publication date | 2019 |
Number of pages | 36 |
Publication status | Published - 2019 |
Event | 46th Annual Conference of the European Association for Research in Industrial Economics. EARIE 2019 - Ciutadella of the Universitat Pompeu Fabra, Barcelona, Spain Duration: 30 Aug 2019 → 1 Sept 2019 Conference number: 46 https://www.barcelonagse.eu/earie2019 |
Conference
Conference | 46th Annual Conference of the European Association for Research in Industrial Economics. EARIE 2019 |
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Number | 46 |
Location | Ciutadella of the Universitat Pompeu Fabra |
Country/Territory | Spain |
City | Barcelona |
Period | 30/08/2019 → 01/09/2019 |
Internet address |