Tobias Salz, Columbia University

"Obfuscation in Loan Intermediation"

Abstract

This project evaluates the consequences of bounded rationality in the auto market, using new and comprehensive administrative data. Most auto loans are intermediated by auto dealers. This arrangement might lower the cost of loans for consumers, because dealers typically obtain rate quotes from many more lenders than consumers would. However, dealer intermediation forces buyers to track relevant car and loan attributes at the same time, which might allow dealers to extract extra surplus from boundedly rational consumers. Dealers might engage in third-degree price discrimination, quoting higher loan prices to consumers who are less financially savvy. 


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Contact persons: Casper Worm and Nikolaj Arpe Harmon