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The Influence of Product Age on Pricing Decisions: An examination of bank deposit interest rate setting.

Lookup NU author(s): Dr Robert AndersonORCiD, Robert Hudson


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

Publication metadata

Author(s): Anderson RDJ, Ashton JK, Hudson RS

Publication type: Working Paper

Publication status: Published

Journal: Centre for Responsible Banking and Finance Working Papers

Type of Article: Working Paper

Year: 2013

Pages: 1-34

Publisher: University of St Andrews