Switching cost and deposit demand in china

• Autores: Chun-Yu Ho
• Localización: International economic review, ISSN-e 1468-2354, Vol. 56, Nº. 3, 2015, págs. 723-749
• Idioma: inglés
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• Resumen

  • This article develops and estimates a dynamic model of consumer demand for deposits in which banks provide differentiated products and product characteristics that evolve over time. The switching cost is 0.8% of the deposit's value, which leads the static model to bias the demand estimates. The dynamic model shows that the price elasticity over a long time horizon is larger than the same elasticity over a short time horizon. Counterfactual experiments with a dynamic monopoly show that reducing the switching cost has a comparable competitive effect on bank pricing as a result of reducing the dominant position of the monopoly