Information Acquisition in Competitive Markets: An Application to the US Mortgage Market

2011 ◽  
Author(s):  
Jeremy Burke ◽  
Curtis R. Taylor ◽  
Liad Wagman
Keyword(s):  
Information Acquisition ◽  
Mortgage Market ◽  
Competitive Markets ◽  
The Us

Information Acquisition in Competitive Markets: An Application to the US Mortgage Market

2012 ◽  
Vol 4 (4) ◽  
pp. 65-106 ◽  
Author(s):  
Jeremy M Burke ◽  
Curtis R Taylor ◽  
Liad Wagman
Keyword(s):  
Price Discrimination ◽  
Information Acquisition ◽  
Risk Groups ◽  
Mortgage Market ◽  
Amount Of Information ◽  
The Us ◽  
Search For Information ◽  
Potential Customers ◽  
High Rejection ◽  
Rejection Rates

How do price commitments impact the amount of information firms acquire about potential customers? We examine this question in the context of a competitive market where firms search for information that may disqualify applicants. Contracts are incomplete because the amount of information acquired cannot be observed. Despite competition, we find that firms search for too much information in equilibrium. If price discrimination is prohibited, members of high-risk groups suffer disproportionately high rejection rates. If rejected applicants remain in the market, the resulting adverse selection can be severe. We apply the results to the US mortgage market. (JEL D82, D83, D86, G21)

scholarly journals Regional Redistribution through the US Mortgage Market

2016 ◽  
Vol 106 (10) ◽  
pp. 2982-3028 ◽  
Author(s):  
Erik Hurst ◽  
Benjamin J. Keys ◽  
Amit Seru ◽  
Joseph Vavra
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
The United States ◽  
Mortgage Market ◽  
Interest Rate Policy ◽  
Us Economy ◽  
The Us ◽  
Local Risk ◽  
Regional Shocks ◽  
Government Sponsored Enterprises

Regional shocks are an important feature of the US economy. Households' ability to self-insure against these shocks depends on how they affect local interest rates. In the United States, most borrowing occurs through the mortgage market and is influenced by the presence of government-sponsored enterprises (GSE). We establish that despite large regional variation in predictable default risk, GSE mortgage rates for otherwise identical loans do not vary spatially. In contrast, the private market does set interest rates which vary with local risk. We use a spatial model of collateralized borrowing to show that the national interest rate policy substantially affects welfare by redistributing resources across regions. (JEL E32, E43, G21, G28, L32, R11, R31)

The GE/Honeywell Merger Case: Reaching the Limits of International Competition Policymaking

2001 ◽  
Vol 2 (12) ◽  
Author(s):  
Malcolm MacLaren
Keyword(s):  
Subject Matter ◽  
International Competition ◽  
Competitive Markets ◽  
General Electric ◽  
Political Interference ◽  
Antitrust Case ◽  
The Us ◽  
Extraterritorial Jurisdiction ◽  
High Politics

The European Commission's recent decision to block the US $42 billion proposed merger between General Electric Co. and Honeywell International Inc. was, as breathlessly reported by the international press, a tale of personalities, high politics, and conflicting ideologies. The respective story lines made for gripping journalism concering the clash between a world business icon and a former Italian economics professor, the US administration's accusations of illegitimate application of extraterritorial jurisdiction and undemocratic exercise of authority by the Commission, the Commission's counter-accusations of attempts at political interference, and the dispute over divergent theories of competitive markets. (Indeed, the events may be worthy subject matter for a sequel to “Antitrust”, a dramatization of the Microsoft antitrust case now playing in theatres).

From Wall Street to Main Street: The Financial Crisis in the US

2009 ◽  
Vol 34 (3) ◽  
pp. 15-24
Author(s):  
Douglas Young
Keyword(s):  
Financial Crisis ◽  
Financial System ◽  
Mortgage Market ◽  
Wall Street ◽  
Policy Responses ◽  
Main Street ◽  
The Us ◽  
Boom And Bust ◽  
Three Stages ◽  
Real Estate Prices

What caused the ‘meltdown’ in the US financial markets? In this transcribed version of his talk delivered at IIMA, Douglas Young explores the variety of factors that influenced the housing boom and bust and discusses how that affected the household saving behaviour and the behaviour of lenders in the mortgage market, ultimately culminating into a financial crisis. The factors which led to the crisis include public policy, financial innovation, and just plain ‘bubble mania’ – the belief that real estate prices would just keep on rising forever. The policy responses are in three stages – (a) prevention of a collapse in the financial system; (b) Economic Stimulus and Recovery Act in place to cut taxes, increase infrastructure spending, etc., and (c) regulatory reforms for the financial system. The consequences of financial crisis for the Wall Street, Main Street, and India are also discussed.

Prospects for the Uk Economy

2009 ◽  
Vol 207 ◽  
pp. 51-70
Author(s):  
Simon Kirby ◽  
Ray Barrell ◽  
Vladimir Pillonca
Keyword(s):  
Global Economy ◽  
Banking System ◽  
Mortgage Market ◽  
Securities Markets ◽  
Access To Credit ◽  
The Past ◽  
Global Banking ◽  
The Us ◽  
Bank Of England ◽  
The Uk

Since our October forecast events have conspired to worsen the outlook for the UK and global economy. Concerns about the solvency of banks across the globe have continued, and in some cases intensified. The inter-linkages of the global economy continue to be highlighted as the list of economies slipping into recession grows, even for those who have not suffered the direct shock of a crisis in their domestic banking system. Indeed what started as a problem in securities markets related to sub-prime lending in the US mortgage market has evolved into the near collapse of the global banking system. The UK has enjoyed the fruits of the rapid growth of financial intermediation over the past decade. However, such gains are being sharply reversed, as discussed on pp. 4–8 of this Review. The problem of access to credit for households and non-financial corporations still persists and, if anything, the situation seems to have deteriorated. As discussed on pp. 71–2 of this Review, Bank of England data suggest that lending by banks to households and businesses contracted in the final quarter of last year, even though £37 billion (2.6 per cent of money GDP) of new capital was injected into two major UK banking groups, effectively nationalising one of them (Royal Bank of Scotland).

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