The influence of product age on pricing decisions: An examination of bank deposit interest rate setting

R.D. Anderson; J.K. Ashton; R.S. Hudson

doi:10.1016/j.intfin.2014.03.010

The influence of product age on pricing decisions: An examination of bank deposit interest rate setting

R.D. Anderson
, J.K. Ashton
, R.S. Hudson

The Albert Gubay Business School

Research output: Contribution to journal › Article › peer-review

Abstract

Do banks extract rent from depositors who hold older deposit accounts? This study addresses this question using product level data from the UK instant access (branch based) deposit market. In this context, two research questions related to the conditions necessary for differential pricing for existing and new customers are assessed. Specifically whether more mature deposit accounts have lower interest rates and does the newest deposit account in a firm portfolio pay an interest rate premium? Empirical support is provided for both questions, with interest rate setting for new and existing deposit accounts also found to be influenced by firm type

Original language	English
Pages (from-to)	216-230
Journal	Journal of International Financial Markets, Institutions and Money
Volume	31
DOIs	https://doi.org/10.1016/j.intfin.2014.03.010
Publication status	Published - 3 Apr 2014

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10.1016/j.intfin.2014.03.010

Constraining the loyalty penalty and complexity costs in retail financial service markets [REF2021]
Ashton, J. (Participant)
Impact: Societal, Policy and Public Services, Economic
Financial Conduct Authority Consultation PAper - CP 20/01 'Introducing a Single Easy Access Rate for cash savings'
Ashton, J. (Participant)
Impact: Economic

Cite this

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title = "The influence of product age on pricing decisions: An examination of bank deposit interest rate setting",

abstract = "Do banks extract rent from depositors who hold older deposit accounts? This study addresses this question using product level data from the UK instant access (branch based) deposit market. In this context, two research questions related to the conditions necessary for differential pricing for existing and new customers are assessed. Specifically whether more mature deposit accounts have lower interest rates and does the newest deposit account in a firm portfolio pay an interest rate premium? Empirical support is provided for both questions, with interest rate setting for new and existing deposit accounts also found to be influenced by firm type",

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AB - Do banks extract rent from depositors who hold older deposit accounts? This study addresses this question using product level data from the UK instant access (branch based) deposit market. In this context, two research questions related to the conditions necessary for differential pricing for existing and new customers are assessed. Specifically whether more mature deposit accounts have lower interest rates and does the newest deposit account in a firm portfolio pay an interest rate premium? Empirical support is provided for both questions, with interest rate setting for new and existing deposit accounts also found to be influenced by firm type

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JO - Journal of International Financial Markets, Institutions and Money

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The influence of product age on pricing decisions: An examination of bank deposit interest rate setting

Abstract

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Impacts

Constraining the loyalty penalty and complexity costs in retail financial service markets [REF2021]

Financial Conduct Authority Consultation PAper - CP 20/01 'Introducing a Single Easy Access Rate for cash savings'

Cite this