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Competition and Selection in Credit Markets / Constantine Yannelis, Anthony Lee Zhang.
- Format:
- Book
- Author/Creator:
- Yannelis, Constantine.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w29169.
- NBER working paper series no. w29169
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- Screening in consumer credit markets is often associated with large fixed costs. We present both theory and evidence that, when lenders use fixed-cost technologies to screen borrowers, increased competition may increase rather than decrease interest rates in subprime consumer credit markets. In more competitive markets, lenders have lower market shares, and thus lower incentives to invest in screening. Thus, when markets are competitive, all lenders face a riskier pool of borrowers, which can lead interest rates to be higher. We provide evidence for the model's predictions in the auto loan market using administrative credit panel data.
- Notes:
- Print version record
- August 2021.
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