Search Disruption During the Pandemic

15:30-17:00, Friday, April 9, 2021

Tencent Meeting (Meeting ID: 560 538 361)

Dr. Guangqian (Isaac) PAN is a lecturer at The University of Sydney Business School. He received his PhD in Finance from The Australian National University in 2019. His research interests include Banking, Corporate Bankruptcy, Corporate Finance, Financial Stability, Information Economics and Behavioral Finance. His work has been presented at various finance and economics conferences, including Econometric Society Australasian Meeting, Financial Management Association Annual Meeting, Asian Finance Association Annual Meeting. He received grant from The University of Sydney Business School/Pilot Research Scheme in 2020.

This paper explores the extent and consequences of physical search disruptions during the Covid-19 pandemic in the U.S. retail deposits market. Mapping a mobile phone dataset tracking 20 million devices daily in U.S. with branch level weekly interest rates since 2019, we find banks offer lower rate when their depositors in that region stay at home more and visit bank branches less frequently during the pandemic. Such effect remains after considering both demand and supply of deposits. Price discrimination is most severe when a branch faces a high deposit supply surge and high pre-crisis local competitions. This finding suggests a search-based channel where exogenous negative shocks on physical search activities increase search frictions and incur losses for consumers. The estimated annual losses for depositors due to inactive search is $13 billion. Furthermore, search friction concentrates during lockdown period and online search can only partially mitigate the friction.

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