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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, Professor Robert Hudson

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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0).

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. (C) 2014 Elsevier B.V. All rights reserved.

Publication metadata

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

Publication type: Article

Publication status: Published

Journal: Journal of International Financial Markets, Institutions and Money

Year: 2014

Volume: 31

Pages: 216-230

Print publication date: 01/07/2014

Online publication date: 03/04/2014

Acceptance date: 26/03/2014

Date deposited: 17/12/2014

ISSN (print): 1042-4431

ISSN (electronic): 1873-0612

Publisher: Elsevier

URL: http://dx.doi.org/10.1016/j.intfin.2014.03.010

DOI: 10.1016/j.intfin.2014.03.010

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