During several episodes of declining or rising interest rate changes in the 1980s and 1990s, credit card rates changed little. At the same time, credit cards consistently earned higher returns than most other bank products. Ausenbel (1991) argues the reason is that the industry deviates from a...

To explain persistence of credit card interest rates at relatively high levels, Calem and Mester (AER, 1995) argued that informational barriers create switching costs for high-balance customers. As evidence, using data from the 1989 Survey of Consumer Finances, they showed that these households...

We present evidence on the objective function of bank management - that is, are they risk neutral and minimize expected profits or are they risk-averse and trade off profit for risk reduction? We extend the model of Hughes and Mester (1993) to allow a bank’s choice of its financial capital...

We present evidence on the objective function of bank management - that is, are they risk neutral and minimize expected profits or are they risk-averse and trade off profit for risk reduction? We extend the model of Hughes and Mester (1993) to allow a bank’s choice of its financial capital...

To explain persistence of credit card interest rates at relatively high levels, Calem and Mester (AER, 1995) argued that informational barriers create switching costs for high-balance customers. As evidence, using data from the 1989 Survey of Consumer Finances, they showed that these households...

Analyzing data from the 1989 Survey of Consumer Finances, we find credit card borrowing is inversely correlated with a household's willingness to comparison shop for loans and deposits. Households with larger balances have higher disutility of search, ceteris paribus. In addition, these...