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Dynamic Competition in Negotiated Price Markets

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  • JASON ALLEN
  • SHAOTENG LI

Abstract

Using contract‐level data for the Canadian mortgage market, this paper provides evidence of an “invest‐and‐harvest” pricing pattern. We build a dynamic model of price negotiation with search and switching frictions to capture key market features. We estimate the model and use it to investigate the effects of market frictions and the resulting dynamic competition on borrowers' and banks' payoffs. We show that dynamic pricing and the presence of search and switching costs have important implications for public policies.

Suggested Citation

  • Jason Allen & Shaoteng Li, 2025. "Dynamic Competition in Negotiated Price Markets," Journal of Finance, American Finance Association, vol. 80(1), pages 561-614, February.
    • Handle: RePEc:bla:jfinan:v:80:y:2025:i:1:p:561-614
    DOI: 10.1111/jofi.13408
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