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The Influence of Product Age on Pricing Decisions: An examination of bank deposit interest rate setting

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  • Robert D. J. Anderson

    (Newcastle University Business School)

  • John Ashton

    (Bangor University, UK)

  • Robert S. Hudson

    (Hull University Business School)

Abstract

Do banks extract rent from depositors who hold older deposit accounts? This study addressed this question using product level data of the UK instant access (branch based) deposit market. In the context of a deposit market two research questions related to the conditions necessary for differential pricing for existing and new customers are assessed. Specifically whether more mature or older deposit accounts have lower interest rates and does the newest deposit account in a firm’ deposit account portfolio pay an interest rate premium? Empirical support, both descriptive and econometric is provided for both questions. Interest rate setting for new and existing deposit accounts is also significantly influenced by the type of firm supplying deposits with considerable variation in returns observed.

Suggested Citation

  • Robert D. J. Anderson & John Ashton & Robert S. Hudson, 2013. "The Influence of Product Age on Pricing Decisions: An examination of bank deposit interest rate setting," Working Papers 13014, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    • Handle: RePEc:bng:wpaper:13014
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    Cited by:

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    2. Aysan, Ahmet F. & Disli, Mustafa & Duygun, Meryem & Ozturk, Huseyin, 2018. "Religiosity versus rationality: Depositor behavior in Islamic and conventional banks," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 1-19.
    3. Simona Galletta & Sebastiano Mazzù & Valeria Naciti & Carlo Vermiglio, 2021. "Sustainable development and financial institutions: Do banks' environmental policies influence customer deposits?," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 643-656, January.
    4. John Ashton & Andros Gregoriou, 2014. "The role of implicit costs and product quality in determining the customer costs of using personal current accounts," Working Papers 14001, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    5. Hellwig, Michael & Laser, Falk Hendrik, 2019. "Bank mergers in the financial crisis: A competition policy perspective," ZEW Discussion Papers 19-047, ZEW - Leibniz Centre for European Economic Research.
    6. Dominika Ehrenbergerová & Martin Hodula & Zuzana Gric, 2022. "Does capital-based regulation affect bank pricing policy?," Journal of Regulatory Economics, Springer, vol. 61(2), pages 135-167, April.
    7. Deuflhard, Florian, 2018. "Quantifying inertia in retail deposit markets," SAFE Working Paper Series 223, Leibniz Institute for Financial Research SAFE.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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