TY  - JOUR
AU  - Woodward,Susan E.
AU  - Hall,Robert E.
TI  - Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16007
PY  - 2010
Y2  - May 2010
UR  - http://www.nber.org/papers/w16007
L1  - http://www.nber.org/papers/w16007.pdf
N1  - Author contact info:
Susan E. Woodward
Sand Hill Econometrics, Inc
115 Everett Ave.
Palo Alto, CA 94301
E-Mail: swoodward@sandhillecon.com

Robert E. Hall
Hoover Institution
Stanford University
Stanford, CA  94305-6010
Tel: 650/723-2215
E-Mail: rehall@gmail.com
AB  - Mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers' lack of knowledge and experience. We study the compensation that borrowers pay to mortgage brokers for assistance from application to closing. Two findings support the conclusion that confused borrowers overpay for brokers' services: (1) A model of effective shopping shows that borrowers sacrifice at least $1,000 by shopping from too few brokers. (2) Borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash.
ER  -