Tax Deductibility, Market Frictions, and Price Discrimination: Evidence from the Mortgage Market.

2021 ◽  
Author(s):  
Maxence Valentin
Keyword(s):  
Price Discrimination ◽  
Mortgage Market ◽  
Market Frictions

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)

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