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Empirical Approaches For Identifying Maverick Firms: An Application To Mortgage Providers In Australia

Author

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  • Robert Breunig
  • Flavio Menezes

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.

Suggested Citation

  • Robert Breunig & Flavio Menezes, 2008. "Empirical Approaches For Identifying Maverick Firms: An Application To Mortgage Providers In Australia," Journal of Competition Law and Economics, Oxford University Press, vol. 4(3), pages 811-836.
    • Handle: RePEc:oup:jcomle:v:4:y:2008:i:3:p:811-836.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhm035
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    Citations

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    Cited by:

    1. Christopher Heard & Flavio M Menezes & Alicia N Rambaldi, 2018. "The dynamics of bank location decisions in Australia," Australian Journal of Management, Australian School of Business, vol. 43(2), pages 241-262, May.
    2. Donja Darai & Catherine Roux & Frédéric Schneider, 2019. "Mergers, mavericks, and tacit collusion," Working Papers 201902, Cambridge Judge Business School, University of Cambridge.
    3. Шаститко А. Е. & Павлова Н. С., 2021. "Антиконкурентные Последствия Антимонопольной Политики: Кейс Мобильных Операторов," Вопросы государственного и муниципального управления // Public administration issues, НИУ ВШЭ, issue 2, pages 7-33.
    4. Kurschilgen, Michael & Morell, Alexander & Weisel, Ori, 2017. "Internal conflict, market uniformity, and transparency in price competition between teams," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 121-132.
    5. Owen Phillips & Dale Menkhaus & John Thurow, 2011. "The Small Firm in a Quantity Choosing Game: Some Experimental Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 191-207, March.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L0 - Industrial Organization - - General
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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