Empirical approaches for identifying maverick firms: An application to mortgage providers in Australia

Breunig, R. and Menezes, F. (2008) Empirical approaches for identifying maverick firms: An application to mortgage providers in Australia. Journal of Competition and Law Economics, 4 3: 811-836. doi:10.1093/joclec/nhm035

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Author Breunig, R.
Menezes, F.
Title Empirical approaches for identifying maverick firms: An application to mortgage providers in Australia
Journal name Journal of Competition and Law Economics   Check publisher's open access policy
ISSN 1744-6422
1744-6414
Publication date 2008
Sub-type Article (original research)
DOI 10.1093/joclec/nhm035
Open Access Status
Volume 4
Issue 3
Start page 811
End page 836
Total pages 26
Editor D. Geradin
J.G. Sidak
Place of publication Oxford, United Kingdom
Publisher Oxford University Press
Collection year 2009
Language eng
Subject
C1
9102 Microeconomics
140209 Industry Economics and Industrial Organisation
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.
Keyword mortgage providers
maverick firms
business strategy
competition
Q-Index Code C1
Q-Index Status Confirmed Code

Document type: Journal Article
Sub-type: Article (original research)
Collections: 2009 Higher Education Research Data Collection
School of Economics Publications
 
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Created: Sun, 19 Apr 2009, 10:17:08 EST by Kaelene Matts on behalf of School of Economics