IDEAS home Printed from https://ideas.repec.org/p/chb/bcchwp/180.html
   My bibliography  Save this paper

Turnover and Regulation: The Chilean Pension Fund Industry

Author

Listed:
  • Solange Berstein
  • Alejandro Micco

Abstract

We study price competition in a model with differentiated products and searching costs. In this model firms charge a price above marginal costs. This positive mark-up gives firms incentive to steal consumers from their rivals. For this purpose, firms hire sales agents that contact customers personally to switch them from one firm to another and offer rewards to the switchers. These rewards can be interpreted as a price cut to rival's customers, which is a form of price discrimination in this model. This model is applied to the Chilean pension funds industry. In 1995 there was more than one sales agent per two hundred customers with a turnover between Pension Fund Administrators of more than 50 percent. This high turnover was associated with large costs, and the authorities reacted by imposing restrictions to switching by the end of 1997. The empirical section of the paper attempts to analyze the role of sales agents in this industry and the impact of such restrictions.

Suggested Citation

  • Solange Berstein & Alejandro Micco, 2002. "Turnover and Regulation: The Chilean Pension Fund Industry," Working Papers Central Bank of Chile 180, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:180
    as

    Download full text from publisher

    File URL: http://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc180.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
    2. Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
    3. Ippolito, Richard A, 1992. "Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 45-70, April.
    4. Tore Nilssen, 1992. "Two Kinds of Consumer Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 23(4), pages 579-589, Winter.
    5. Klaus Schmidt-Hebbel, 1997. "Pension Reform, Informal Markets and Long-Term Income and Welfare," Working Papers Central Bank of Chile 04, Central Bank of Chile.
    6. Drew Fudenberg & Jean Tirole, 2000. "Customer Poaching and Brand Switching," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 634-657, Winter.
    7. Solange Berstein, 2002. "Two-Part Tariff Competition With Switching Costs and Sales Agents," Working Papers Central Bank of Chile 162, Central Bank of Chile.
    8. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
    9. Salvador Valdés & Peter Diamond, "undated". "Social Security Reforms in Chile," Documentos de Trabajo 161, Instituto de Economia. Pontificia Universidad Católica de Chile..
    10. Greg Shaffer & Z. John Zhang, 2000. "Pay to Switch or Pay to Stay: Preference-Based Price Discrimination in Markets with Switching Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 397-424, June.
    11. Caminal, Ramon & Matutes, Carmen, 1990. "Endogenous switching costs in a duopoly model," International Journal of Industrial Organization, Elsevier, vol. 8(3), pages 353-373, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Bravo Urrutia & Olivia S. Mitchell & Petra Todd, 2007. "Learning from the Chilean Experience: The Determinants of Pension Switching," Working Papers wp266, University of Chile, Department of Economics.
    2. Jorge Tarziján M, 2005. "Evaluación de la Autorización de Planes de Precio por Permanencia a las AFP," Working Papers 10, Superintendencia de Pensiones, revised Aug 2005.
    3. Heinz Rudolph & Hela Cheikhrouhou & Roberto Rocha & Craig Thorburn, 2007. "Financial Sector Dimensions of the Colombian Pension System," World Bank Publications, The World Bank, number 6785, July.
    4. Solange Berstein Jáuregui & Carolina Cabrita Felix, 2007. "Los determinantes de la elección de AFP en Chile: nueva evidencia a partir de datos individuales," Estudios de Economia, University of Chile, Department of Economics, vol. 34(1 Year 20), pages 53-72, June.
    5. Solange Berstein & José Luis Ruiz V, 2005. "Sensibilidad de la Demanda con Consumidores Desinformados: El Caso de las AFP en Chile," Working Papers 4, Superintendencia de Pensiones, revised Apr 2005.
    6. Alejandro Corvalán & Pablo Serra, 2005. "Sunk Prices And Salesforce Competition," Documentos de Trabajo 216, Centro de Economía Aplicada, Universidad de Chile.
    7. World Bank & International Monetary Fund, 2006. "Financial Sector Assessment Program Update : Republic of Poland - Competition and Performance in the Polish Second Pillar," World Bank Other Operational Studies 16052, The World Bank.
    8. Heinz Rudolph & Roberto Rocha, 2007. "Competition and Performance in the Polish Second Pillar," World Bank Publications, The World Bank, number 6775, July.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:180. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda). General contact details of provider: http://edirc.repec.org/data/bccgvcl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.