Switching costs and adverse selection in the market for credit cards: New evidence
To explain persistence of credit card interest rates at relatively high levels, Calem and Mester (AER, 1995) argued that informational barriers create switching costs for high-balance customers. As evidence, using data from the 1989 Survey of Consumer Finances, they showed that these households were more likely to be rejected when applying for new credit. In this paper, they revisit the question using the 1998 and 2001 SCF. Further, they use new information on card interest rates to test for pricing effects consistent with information-based switching costs. The authors find that informational barriers to competition persist, although their role may have declined. ; Also issued as Payment Cards Center Discussion Paper No. 05-09
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- Paul S. Calem & Loretta J. Mester, 1994.
"Consumer Behavior and the Stickiness of Credit Card Interest Rates,"
Center for Financial Institutions Working Papers
94-14, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Calem, Paul S & Mester, Loretta J, 1995. "Consumer Behavior and the Stickiness of Credit-Card Interest Rates," American Economic Review, American Economic Association, vol. 85(5), pages 1327-36, December.
- Paul S. Calem & Loretta J. Mester, 1995. "Consumer behavior and the stickiness of credit card interest rates," Working Papers 95-10, Federal Reserve Bank of Philadelphia.
- Paul S. Calem & Loretta J. Mester, . "Consumer Behavior and the Stickiness of CreditCard Interest Rates," Rodney L. White Center for Financial Research Working Papers 3-94, Wharton School Rodney L. White Center for Financial Research.
- Paul S. Calem & Loretta J. Mester, . "Consumer Behavior and the Stickiness of CreditCard Interest Rates," Rodney L. White Center for Financial Research Working Papers 03-94, Wharton School Rodney L. White Center for Financial Research.
- Loretta J. Mester, 1993.
"Why are credit card rates sticky?,"
93-16, Federal Reserve Bank of Philadelphia.
- Stango, Victor, 2002. "Pricing with Consumer Switching Costs: Evidence from the Credit Card Market," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 475-92, December.
- Kerr, Sougata & Dunn, Lucia, 2008.
"Consumer Search Behavior in the Changing Credit Card Market,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 26, pages 345-353.
- Lucia Dunn & Sougata Kerr, 2002. "Consumer Search Behavior in the Changing Credit Card Market," Working Papers 02-03, Ohio State University, Department of Economics.
- David B. Gross & Nicholas S. Souleles, 1999.
"An Empirical Analysis of Personal Bankruptcy and Delinquency,"
Center for Financial Institutions Working Papers
98-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
- David B. Gross, 2002. "An Empirical Analysis of Personal Bankruptcy and Delinquency," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 319-347, March.
- David B. Gross & Nicholas S. Souleles, 2001. "An Empirical Analysis of Personal Bankruptcy and Delinquency," NBER Working Papers 8409, National Bureau of Economic Research, Inc.
- Sandra E. Black & Donald P. Morgan, 1999. "Meet the new borrowers," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Feb).
- Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
- Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
- Robert B. Avery & Paul S. Calem & Glenn B. Canner, 2003. "An overview of consumer data and credit reporting," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 47-73.
- Mitchell Berlin & Loretta J. Mester, 1987.
"Credit card rates and consumer search,"
88-1, Federal Reserve Bank of Philadelphia.
- Mark Furletti, 2003. "Credit card pricing developments and their disclosure," Payment Cards Center Discussion Paper 03-02, Federal Reserve Bank of Philadelphia.
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