Will Matcham
willmatcham.bsky.social
Will Matcham
@willmatcham.bsky.social
Economist specialising in IO, household finance, and innovation.

PhD Economics from LSE; AP at RHUL

https://willmatcham.com
You can see the details of the revision here:
papers.ssrn.com/sol3/papers....

Let me know if you have any comments or questions and I'll be happy to answer! (10/10)
Risk-Based Borrowing Limits in Credit Card Markets
<div> I use novel statement-level data on the 2010—2015 UK credit card market to show that <span>lenders individualize contracts through risk-based credit
papers.ssrn.com
March 10, 2025 at 6:35 PM
I am really looking forward to presenting and submitting this paper going forward, knowing that I have addressed this frequent comment. I can finally be at peace with the paper, and now just need to find a home for it. Wish me luck! (9/10)
March 10, 2025 at 6:35 PM
All other findings in the paper go through, including my favourite figure from the paper, included here. It shows that lenders use interest rate tailoring in the counterfactual to price discriminate, rather than control default risk (which is done separately through tailored credit limits). (8/10)
March 10, 2025 at 6:35 PM
My estimated costs to lenders of individualizing interest rates are substantial, are higher at lenders known to have more sophisticated customers and correlate positively with individuals’ incomes. So, this change was not just to patch up my machinery, but generated new insights (7/10)
March 10, 2025 at 6:35 PM
Then, the counterfactual could be operationalized by turning off the regulatory constraint and setting these costs to zero. Now I am even more confident that the model and counterfactuals are internally consistent. (6/10)
March 10, 2025 at 6:35 PM
I finally cracked how to model lenders’ interest rate and credit limit choices subject to the regulation. The key trick was to include linear costs to lenders of individualizing interest rates, which I could estimate off the few cases where they did choose to deviate from the rate advertised. (5/10)
March 10, 2025 at 6:35 PM
While I sympathized with these comments, it was never obvious to me how I could give lenders the potential to individualize interest rates and credit limits in the baseline, subject to the regulation.

That all changed at the start of this year, however.. (4/10)
March 10, 2025 at 6:35 PM
Prior to this revision, I was often confronted with the comment that my baseline model did not explain interest rate choices and was therefore not appropriate for a counterfactual in which I take away the regulation limiting lenders in individualizing interest rates. (3/10)
March 10, 2025 at 6:35 PM
In the paper I use statement-level data to show that UK lenders tailor credit limits, but NOT interest rates, to customers’ risk. They are inhibited by the costs of individualizing interest rates that come from EU-wide regulations requiring them to advertise an interest rate for each product (2/10)
March 10, 2025 at 6:35 PM