Three essays on empirical industrial organization
type: CreativeWork
description: This dissertation contains three chapters on topics in the field of empirical industrial organization. The first two chapters focus on lender and borrower strategies in the U.S. mortgage market while the third chapter addresses the asymmetric price adjustment phenomenon in the U.S. gasoline market. The first chapter shows how consumer search confers positive externalities to other consumers in the same market. These externalities can be either direct, by sharing information from prior searches and thus improving the effectiveness of the search process, or indirect, by changing the equilibrium strategies of firms. Either type of externality allows consumers to reduce their own costly search activity: a consumer in a market populated with low search cost consumers searches less than an otherwise identical consumer in another market populated with high search cost consumers, while obtaining lower prices. We present evidence in support of the presence of both direct and indirect externalities in the U.S. mortgage issuance industry, though the evidence is stronger for the former than for the latter. Given that in the mortgage industry lenders tend to charge the same mortgage rates within all markets in a state, indirect externalities operate through the composition of active firms in a market. This margin is typically ignored in the theoretical literature, as often is the possibility of direct information externalities. The second chapter investigates the systematic differences in pricing between mortgage lenders operating in many states and those operating in one or a handful of states. We provide evidence that multi-state lenders' price for a given mortgage product is influenced by the price they charge for that same product in their other markets. Moreover, the pricing of a product in a state reflects the importance of that product in all the markets a lender is active in rather than its importance in that particular state. These effects are more pronounced for non-ba…
abstract: This dissertation contains three chapters on topics in the field of empirical industrial organization. The first two chapters focus on lender and borrower strategies in the U.S. mortgage market while the third chapter addresses the asymmetric price adjustment phenomenon in the U.S. gasoline market. The first chapter shows how consumer search confers positive externalities to other consumers in the same market. These externalities can be either direct, by sharing information from prior searches and thus improving the effectiveness of the search process, or indirect, by changing the equilibrium strategies of firms. Either type of externality allows consumers to reduce their own costly search activity: a consumer in a market populated with low search cost consumers searches less than an otherwise identical consumer in another market populated with high search cost consumers, while obtaining lower prices. We present evidence in support of the presence of both direct and indirect externalities in the U.S. mortgage issuance industry, though the evidence is stronger for the former than for the latter. Given that in the mortgage industry lenders tend to charge the same mortgage rates within all markets in a state, indirect externalities operate through the composition of active firms in a market. This margin is typically ignored in the theoretical literature, as often is the possibility of direct information externalities. The second chapter investigates the systematic differences in pricing between mortgage lenders operating in many states and those operating in one or a handful of states. We provide evidence that multi-state lenders' price for a given mortgage product is influenced by the price they charge for that same product in their other markets. Moreover, the pricing of a product in a state reflects the importance of that product in all the markets a lender is active in rather than its importance in that particular state. These effects are more pronounced for non-ba…
author: Li, Zening
language: en
keywords: Consumer Search, Information Spillovers, Price to the Market, Asymmetric Price Adjustments
date published: 2018-09-27T16:30:19Z
date modified: 2026-07-22T22:24:40Z
provider: University of Illinois - Urbana-Champaign
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Illinois at Urbana-Champaign

PropertyValue
property ID: Handle
value: http://hdl.handle.net/2142/101683