Empirical Approaches for Identifying Maverick Firms: An Application to Mortgage Providers in Australia

Robert Breunig, Flavio Menezes

    Research output: Contribution to journalArticle

    Abstract

    This paper develops an empirical strategy to identify maverick-like behavior. This strategy includes measuring two behavioral dimensions: (i) the extent to which particular suppliers underprice rivals; and (ii) the timing of the suppliers' responses to systemic cost changes. This strategy is applied to a dataset that contains interest rates charged by mortgage providers in Australia from January 2003 to October 2006. We then evaluate suppliers' behavior both in terms of the rates that they charge and the time it takes them to change their rates as a response to a systemic increase in costs that follows a change of the cash rate by the Reserve Bank of Australia (RBA). We find that systematic price discounts and the frequency and timing of price increases and decreases are both important, but distinct, components of maverick-like behavior. These empirical observations suggest that the development of a theory for maverick behavior be focused on dynamic, asymmetric models and informed by institutions and market dynamics that are relevant to the case at hand.
    Original languageEnglish
    Pages (from-to)811-836
    JournalJournal of Competition Law & Economics
    Volume4
    Issue number3
    DOIs
    Publication statusPublished - 2008

    Fingerprint Dive into the research topics of 'Empirical Approaches for Identifying Maverick Firms: An Application to Mortgage Providers in Australia'. Together they form a unique fingerprint.

    Cite this