nr 102 Price Leadership in the Dutch Mortgage Market

DNB Working Papers
Publicatiedatum 21 juni 2006

We study competitive price setting behavior in the Dutch mortgage market, using daily observations on advertised 5- and 10-year mortgage interest rates for a sample of the four largest Dutch banks. We (1) estimate a VECM model, (2) a discrete choice model and (3) a structural conjectural variation model. The results indicate that one of the banks is a price leader, but that waiting for the leader to set the first step does not exclude competitive pricing by the followers. Keywords: Mortgage market, Competition, Price leadership, VECM, Probit, Conjectural variation. JEL-code: G21, L13