NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Jason Allen

Bank of Canada
234 Wellington Street
Ottawa, ON K1A 0G9

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

February 2014Search Frictions and Market Power in Negotiated Price Markets
with Robert Clark, Jean-Fran├žois Houde: w19883
This paper develops and estimates a search and bargaining model designed to measure the welfare loss associated with frictions in oligopoly markets with negotiated prices. We use the model to quantify the consumer surplus loss induced by the presence of search frictions in the Canadian mortgage market, and evaluate the relative importance of market power, inefficient allocation, and direct search costs in explaining the loss. Our results suggest that search frictions reduce consumer surplus by almost $20 per month per consumer, and that 17% of this reduction can be associated with discrimination, 30% with inefficient matching, and the remainder with the search cost.
June 2013The Effect of Mergers in Search Market: Evidence from the Canadian Mortgage Industry
with Robert Clark, Jean-Fran├žois Houde: w19126
We examine the relationship between concentration and price dispersion using variation induced by a merger in the Canadian mortgage market. Since interest rates are determined through a search and negotiation process, consolidation eliminates a potential negotiation part- ner, weakening consumers bargaining positions. We combine reduced-form techniques to es- timate the mergers distributional impact, with a structural model to measure market power across consumers with different search costs. Our results show that competition benefits only consumers at the bottom and middle of the transaction price distribution. Estimates from a search and negotiation model attribute these differences to the presence of large search frictions.

Published: Jason Allen & Robert Clark & Jean-Fran?ois Houde, 2014. "The Effect of Mergers in Search Markets: Evidence from the Canadian Mortgage Industry," American Economic Review, American Economic Association, vol. 104(10), pages 3365-96, October. citation courtesy of

 
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