Marcos Ariel Lissauer from Torcuato di Tella University will present "Breaking Uniform Pricing" joint with D. Argente.

Abstract: Uniform pricing is a defining feature of firms that operate across multiple markets. We study a setting in which it breaks down. We examine home equity lines of credit (HELOCs), where lending capacity depends on local housing conditions. Using branch-level rate data, we show that HELOC pricing is nearly uniform within banks in normal times. During the Great Recession, within-bank pricing dispersion rises sharply in regions more exposed to house price declines, particularly among multiregion banks that are more exposed to these shocks. To interpret these patterns, we develop and estimate a model in which banks operate integrated branch networks with common marginal intermediation costs but face local lending limits tied to collateral conditions. The model implies that the probability a local lending constraint binds is a sufficient statistic for deviations from uniform pricing. It matches both aggregate HELOC lending and the evolution of within-bank dispersion. Counterfactuals show that imposing uniform pricing raises rates and reduces credit. Uniform pricing is sustainable when local constraints are slack but becomes distortionary when lending capacity tightens unevenly across regions, raising rates and amplifying credit contractions.