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Price Leadership in the Dutch Mortgage Market

  • Leo de Haan
  • Elmer Sterken

We study competitive price setting behavior in the Dutch mortgage market, using daily observations on advertised 5- and 10-year mortgage interest rates for a sample of the four largest Dutch banks. We (1) estimate a VECM model, (2) a discrete choice model and (3) a structural conjectural variation model. The results indicate that one of the banks is a price leader, but that waiting for the leader to set the first step does not exclude competitive pricing by the followers.

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File URL: http://www.dnb.nl/binaries/Working%20Paper%20102_tcm46-146759.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 102.

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Date of creation: Jun 2006
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Handle: RePEc:dnb:dnbwpp:102
Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/

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  1. W.H.J. Hassink & M. van Leuvensteijn, 2003. "Price-setting and Price Dispersion in the Dutch Mortgage Market," Working Papers 03-07, Utrecht School of Economics.
  2. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, June.
  3. J.A. Bikker & K. Haaf, 2000. "Competition, concentration and their relationship: an empirical analysis of the banking industry," Research Series Supervision (discontinued) 30, Netherlands Central Bank, Directorate Supervision.
  4. Leo Haan & Elmer Sterken, 2011. "Bank-Specific Daily Interest Rate Adjustment in the Dutch Mortgage Market," Journal of Financial Services Research, Springer, vol. 39(3), pages 145-159, June.
  5. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
  6. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
  7. J.A. Bikker, 2003. "Testing for imperfect competition on EU deposit and loan markets with Bresnahan's market power model," Research Series Supervision (discontinued) 52, Netherlands Central Bank, Directorate Supervision.
  8. Goldberg, Lawrence G. & Rai, Anoop, 1996. "The structure-performance relationship for European banking," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 745-771, May.
  9. L.W. Punt & M.C.J. van Rooij, 1999. "The profit-structure relationship, efficiency and mergers in the European banking industry: an empirical assessment," WO Research Memoranda (discontinued) 604, Netherlands Central Bank, Research Department.
  10. Coccorese, Paolo, 2005. "Competition in markets with dominant firms: A note on the evidence from the Italian banking industry," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1083-1093, May.
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