Information acquisition in competitive markets: An application to the US mortgage market


Journal Article

How do price commitments impact the amount of information firms acquire about potential customers? We examine this question in the context of a competitive market where firms search for information that may disqualify applicants. Contracts are incomplete because the amount of information acquired cannot be observed. Despite competition, we find that firms search for too much information in equilibrium. If price discrimination is prohibited, members of high-risk groups suffer disproportionately high rejection rates. If rejected applicants remain in the market, the resulting adverse selection can be severe. We apply the results to the US mortgage market.

Full Text

Duke Authors

Cited Authors

  • Burke, JM; Taylor, CR; Wagman, L

Published Date

  • December 1, 2012

Published In

Volume / Issue

  • 4 / 4

Start / End Page

  • 65 - 106

Electronic International Standard Serial Number (EISSN)

  • 1945-7685

International Standard Serial Number (ISSN)

  • 1945-7669

Digital Object Identifier (DOI)

  • 10.1257/mic.4.4.65

Citation Source

  • Scopus