Predicting Household Switching Behavior and Switching Costs at Depository Institutions

Predicting Household Switching Behavior and Switching Costs at Depository Institutions This paper uses new survey data to investigate the covariates of self-reported switching costs and switching behavior by deposit account holders. Factors affecting geographic mobility appear to be most important in explaining the duration of deposit relationships. Both younger and older respondents are more likely than others to be at their first bank ever, suggesting a cohort effect in deposit relationships. Households reporting switching costs, net of the benefits from switching, are less likely than others to have stayed with a bank for prices or customer service, suggesting that switching costs may decrease price sensitivity. Switching costs appear more severe for households with high income or education and for households with very low income or minority ethnicity. These findings imply that banking markets characterized by such households may present greater entry costs for new firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Predicting Household Switching Behavior and Switching Costs at Depository Institutions

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Publisher
Springer Journals
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1015692910277
Publisher site
See Article on Publisher Site

Abstract

This paper uses new survey data to investigate the covariates of self-reported switching costs and switching behavior by deposit account holders. Factors affecting geographic mobility appear to be most important in explaining the duration of deposit relationships. Both younger and older respondents are more likely than others to be at their first bank ever, suggesting a cohort effect in deposit relationships. Households reporting switching costs, net of the benefits from switching, are less likely than others to have stayed with a bank for prices or customer service, suggesting that switching costs may decrease price sensitivity. Switching costs appear more severe for households with high income or education and for households with very low income or minority ethnicity. These findings imply that banking markets characterized by such households may present greater entry costs for new firms.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 13, 2004

References

  • Interstate Long Distance Rates: Search Costs, Switching Costs, and Market Power
    Knittel, C. R.
  • The Effect of Consumer Switching Costs on Prices: A Theory and its Application to the Bank Deposit Market
    Sharpe, S. A.

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